Monday, June 29, 2009

The Citizens in Energy Rich States Cheated out of Natural Recources, Threatened by Big Oil

States with oil, natural gas, coal and mineral deposits deserve to make more money from their natural resources. The federal government asks for a royalty, why can’t the states in the form of a tax? Every time anyone suggests a gas tax increase, the threats from oil companies fly fast and furious. It’s called blackmail. They whine that profits will suffer and prices will have to rise. Boo hoo. The Wall Street Journal sums it up this way:

"Cash-strapped states are considering raising taxes on oil production to plug yawning budget gaps, but they face strong resistance from oil companies, which warn the moves could lead to lost jobs and higher energy prices."

But oddly, the facts are on the tax raisers side.

"…advocates for increased taxes argue that taxes play a smaller role in companies' drilling decisions than factors such as how much oil is present or how difficult it is to produce … if states want to encourage drilling and maximize revenue, they should have relatively high severance taxes but encourage companies to look for new oil fields. That is the approach taken by Alaska, which has the country's highest severance tax rate, at 25% of net income per well, but also offers subsidies for companies to invest in the state."

Although all of this makes perfect sense, I still believe the citizens of an energy rich state should be enriched by its natural resources, while still allowing big oil to make its profits. (I know, pump prices are high in Alaska)

And if they threaten to raise their prices, threaten again to raise their taxes. Two can play that game.

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