Taxing big oil isn't fair

With the 2016 election cycle in full swing, candidates on both sides of the aisle are pontificating about energy solutions. An evolving energy landscape creates challenges for a comprehensive plan that balances day-to-day energy needs with the growth of clean and renewable energy. Too often, campaign plans are heavy on rhetoric and light on substance.

An important milestone in energy economics was reached in 2013. For the first time in nearly 20 years, America's production of oil exceeded imports and the U.S. Energy Administration now forecasts that the United States will become a net exporter of natural gas by 2017. The U.S. is a leader in the global energy race. In order to sustain this historic shift, it is essential for the U.S. to demonstrate innovative and risk-mitigation leadership in managing our energy resources.

Oil jack pumps in the Kern River oil field in Bakersfield, California.
Jonathan Alcorn | Reuters
Oil jack pumps in the Kern River oil field in Bakersfield, California.

It is undeniable that clean energy resources are important for environmental sustainability and warrant our support. But pursuit of this priority shouldn't be adopted at the detriment of other energy resources. We cannot – and absolutely should not – simply turn off the spigot for fossil fuels and expect the lights to come on when we flip a switch. It will take time and customer adaptation to new technologies and new infrastructure to transition to cleaner and more renewable energy sources. While the renewable revolution is indeed a fait accompli, energy from fossil fuels maintains a fundamental role in our $18 trillion economy.

Such complex balancing also means that tax policy becomes even more important. We pass tax laws not just to raise revenue to fund government priorities, but also to encourage some behaviors while discouraging others. Right now we need to encourage cleaner energy without undermining competitiveness, and without discouraging production of traditional energy resources. We need to avoid enacting punitive tax measures driven by politics rather than sound policy.

I have been frustrated over my years at the center of our nation's energy debate to hear leaders attempt to attack oil and gas companies using the tax code. For instance, President Obama's budget plans have consistently taken away certain cost-recovery mechanisms, such as the Section 199 domestic manufacturing deduction, from only the oil and gas industry while leaving it intact for other industries. Tax inequities foster artificial market distortions and ultimately injure those who can least afford the manipulations- low-income energy consumers.

Many of the tax policies are aimed strictly at the four or five companies that make up the bulk of our energy industry. They would make it harder for American companies to continue to pursue the growth that they've spurred in recent years – particularly amidst record-low oil prices- and would create a false choice between "renewable" energy and traditional fossil fuels.

Under any policy framework, both energy sources have a crucial role to play, and they should not be pitted against one another for political gain.

Unfairly punishing some companies with higher taxes is an unwarranted declaration of class warfare. The net losers are those who can't afford the inevitable increase in higher energy prices resulting from the higher taxes. The net losers are disproportionately poor American families and small businesses. Higher taxes decrease the number of well-paying jobs with growth opportunities in the energy industry. Most importantly, American energy companies are at a global competitive disadvantage in a higher tax regime as they compete on the world market.

The truth is that the decisions we make today will have profound implications for our future – both for a cleaner environment and for a growing job market and economy.

I believe we can meet the needs of customers in terms of promoting reliability and the low cost of power while doing it in a way that does not forfeit the future for our children and posterity.

It just takes leadership that embraces customer-oriented creativity and an energy portfolio that includes all forms of energy to allow Americans to enjoy the quality of life today and tomorrow.

Commentary by Bill Dickens, a senior economist with a U.S. utility and an active member of the American Association of Blacks in Energy. Follow him on Twitter @BillDickens3.