Congress is considering at least $80 billion in new taxes on the oil and natural gas industry, as proposed in President Obama’s fiscal year 2011 budget and in other legislation.

America needs energy policies that help grow our economy, encourage innovation and create jobs. Raising taxes, particularly as the economy is trying to recover from a deep recession, is not the way to achieve these critical goals. As a recent poll indicates, 64 percent of registered voters in 10 states oppose higher taxes on America's oil and natural gas industry — a 2-to-1 margin. This includes 46 percent of voters who strongly oppose these tax hikes. With 15 million people out of work, now is not the time to impose more taxes.

Additionally, an August 2010 study,  produced by Wood Mackenzie and commissioned by API, shows examines the effects of eliminating two tax incentives: intangible drilling cost expensing and the domestic production activities (section 199) deduction.  The study estimates that the negative effects of tax increases would be worst for natural gas,  a clean-burning resource the nation will increasingly rely on to help reduce greenhouse gas emissions. When combined with today's low natural gas prices, Wood Mackenzie estimates a total of 300,000 to 600,000 barrels of oil equivalent per day (boe/d) would be at risk in 2011. In 2017, proposed tax changes could put more than 10 percent of U.S. total production capacity in jeopardy.

Higher energy taxes could reduce production and increase costs, placing the burden on hard-working Americans and their families: 

• New taxes kill jobs. With America trying to recover from a deep recession, and families in the Gulf Region struggling to make ends meet, new taxes could depress job creation when our country needs more jobs.

• New taxes hurt consumers and businesses. Historically, higher taxes result in less domestic energy, and restrained supplies often lead to higher energy costs for consumers. In today’s economy, that could not only stifle a recovery but also leave Americans more dependent on foreign oil and natural gas, result in fewer jobs for workers and mean less oil and natural gas for consumers and businesses.

• The U.S. oil and natural gas industry supports 9.2 million American workers. This includes welders, electricians, truckers, gas station attendants and small business owners who work hard to bring energy to America’s homes, factories, hospitals and cars. Additional taxes could drive these jobs overseas at a time when America needs to create jobs.

• Millions of Americans have seen their retirement savings shrink. Billions in new taxes on U.S. oil and natural gas companies will hurt millions of Americans whose retirements depend on mutual funds, pension and retirement plans that own oil company shares.

• Plans to strengthen America’s energy security would be undermined since higher taxes would lead to less—not more—domestic oil and natural gas production. All reputable forecasts show that oil and natural gas will be required to meet the majority of America’s energy needs for decades to come. As the economy recovers, America will need all the energy we can produce. Higher taxes would rob the industry of the capital it needs to invest in alternatives and reduce supplies of the oil and natural gas needed as a bridge to the future.

• Current tax policies do not provide taxpayer subsidies to the oil and natural gas industry. The G-20 nations’ agreement to eliminate fossil fuel “subsidies” should not be used as an excuse to raise taxes, and the assertion by the Obama Administration that tax provisions intended to help companies recover their costs have resulted in overproduction of oil and natural gas is ludicrous. Such wrong-headed policy prescriptions suggest that Americans must make an unwise and unnecessary choice between green energy and traditional oil and natural gas. Americans will need all energy sources in the future and such false choices would only hurt workers, businesses and the economy.

• There is a better way than saddling a troubled economy with new taxes that hurt American families. The oil and natural gas industry should be allowed to develop the vast energy resources that belong to the American people. It would improve America’s energy security, create jobs and grow federal, state and local tax revenues. In fact, a recent ICF International study found that developing the vast domestic oil and natural gas resources on federal lands that had been kept off-limits by Congress for decades could generate $1.7 trillion in government revenue. At the same time, tax policies should give America’s oil and natural gas industry the tools they need to compete against giant foreign oil companies often owned by their governments.

At a time when other countries are providing incentives to develop their own energy resources, the U.S. is the only country actively discouraging it. The bottom line is that what happens in the oil and natural gas industry reverberates throughout the economy. See what energy taxes would mean to your state.

To take action against harmful new taxes on the industry, please visit our partner site, EnergyCitizens.org. Or sign up for updates to stay informed about this and other important energy issues.