Gulf oil ‘permitorium’ must end

I’ve said that before, and I will keep repeating it. So why does the Obama administration continue to wage war on our domestic energy industry, with the result being lost jobs, a reduced standard of living and higher gas prices? Especially at the worst time imaginable, when unemployment is at 9.1 percent?

The panic over last summer’s Gulf of Mexico oil spill led the administration to foolishly halt all offshore oil exploration. After bipartisan pressure and efforts by the oil industry to contain future deepwater spills, the administration grudgingly announced a “lifting” of the ban in October. So far though, the Interior Department has rarely issued a permit — only 15 as this is written, and those 15 were already in the pipeline before the BP spill.

Rep. Steve Scalise, R-La., places this continuing and disastrous deepwater drilling “permitorium” into perspective: “(M)ore than 13,000 people have lost their jobs in the energy industry, leading to skyrocketing gas prices and a greater dependence on foreign oil. Make no mistake: The independent energy producers who hold the majority of offshore drilling leases and the small businesses that provide services to our domestic energy industry are the ones who are bearing the brunt of the president’s failure to jump-start the offshore permitting process.”

Indeed, the small, independent companies account for approximately 80 percent of gulf exploration and drilling.

All too many of these companies have been forced to reduce operations and ship employees and infrastructure overseas. Consider the example of Baker Hughes, a Houston-based, international oil field services firm that moved 300 of its gulf employees to foreign land and shifted 25 percent of its assets overseas. Chief Executive Officer Chad Deaton said that if the permitorium doesn’t end, more than 200,000 jobs ultimately could be affected.

There is no such thing as a “temporary” pause in the oil exploration and drilling business. Once these rigs leave, many won’t return for years, if ever. That is why the industry is alarmed when it points to diminished “spare capacity”– the amount of excess capacity and the difference between products that are consumed. This excess capacity was 15 percent in the summer of 2008. Today it’s 5 percent.

Yes, oil giant Exxon was recently granted a rare permit by the Interior Department. But unless smaller independents are allowed to return to work, more gulf jobs will be lost, gas prices will remain high and our quality of life will suffer.

Scalise further warns that if stifling Interior Department policies continue, future revenue sharing for Louisiana to implement coastal restoration projects, as well as more than $350 million in state and local tax revenues, could be lost.

It is also important for the president and other Democratic politicians to stop the blame game — namely, attacks on “Big Oil” for rising gas prices and on the so-called “subsidies” they claim these companies receive through tax provisions. This baseless rhetoric harms the entire domestic oil and gas industry. As industry experts and knowledgeable Democrats and Republicans in Congress underscore, doing away with tax provisions for exploration will not hurt big companies such as Exxon. It cripples those smaller oil and gas independents that produce 93 percent of the wells in the United States.

Remember, those tax provisions, which are not “subsidies,” allow independents to invest their profits in reserves and production, as well as create jobs.

It is astounding that no other country has such rich offshore resources, yet rules them off limits. And to add insult to injury, President Obama actually visited Brazil touting a U.S.-backed loan for oil exploration off that country’s shores — and even expressed hope that the United States would become a big Brazilian customer. Incredible!

Earlier in the decade, the United States was making gains in cutting dependence on foreign oil. In 2002, 60 percent of our oil was coming from foreign sources. Today it’s 48 percent, and we seem to be doing everything in our regulatory and tax policy to get back to 60 percent or above. We are becoming more dependent on foreign oil because of this administration’s hostility to all offshore and domestic oil and gas exploration.

Congress must insist the president end his destructive policies toward the oil industry.

Consider the bottom line: If oil is worth fighting for in the Middle East, isn’t it worth finding in the United States?

J.C. Watts (JCWatts01@jcwatts.com) is chairman of J.C. Watts Companies, a business consulting group. He is former chairman of the Republican Conference of the U.S. House, where he served as an Oklahoma representative from 1995 to 2002. He writes twice monthly for the Review-Journal.