Several swing states rely on the oil and gas industry to fill their coffers. Green-energy policies would upend their budgets, with no fix in sight.
It’s hardly a secret that across the country, Americans are paying more for a gallon of gas than they could have conceived of two years ago.
The pain at the pump is attributable not just to uncontrollable events around the globe, as the Biden administration argues, but to domestic decisions at the federal and state level, such as the canceling of the Keystone pipeline, the imposition of burdensome regulations, and the constant reminder that it is the goal of one of America’s two major parties to phase-out the oil and gas industry entirely.
Beneath the burdens placed on everyday citizens, however, there’s another, under-discussed house of cards waiting to be toppled by Democratic aims: the fiscal footing of more than a few swing states.
In New Mexico, for example, nearly half (42 percent) of the state government’s revenue can be traced back to the oil and gas industry, which is tapped by myriad taxes, royalties, and other fees. And thanks to soaring oil and natural gas prices, the state has seen its coffers stacked to the point that George Muñoz, the Democratic chair of the state senate’s finance committee, remarked last August that “There’s going to be a lot more money than we know what to do with in the next few years.”
Representative Larry Scott, a Republican legislator, told National Review that he agrees on that count.
“New Mexico is literally floating over an ocean of money,” said Scott, who attributed the high revenues to both the oil and gas industry and federal pandemic dollars.
Between state leases to the industry, severance and gross receipts taxes levied directly on producers, and the 130,000 high-paying jobs that translate into income-tax revenue, the state government benefits enormously from New Mexico’s abundance of oil and natural gas.
Scott explained that while he is a believer in climate change, and supports investments to help humanity adapt to it, he worries that New Mexico Democrats’ policy proposals will do little to mitigate the effects of carbon emissions while sending the state off of a fiscal cliff.
In particular, Scott worries about new ozone precursor rules adopted by New Mexico’s Environmental Improvement Board at the direction of Governor Michelle Lujan Grisham, and the Energy Transition Act, which Grisham signed into law in 2019. The former will require producers to monitor for ozone leaks more frequently and fix them more quickly. According to Scott, that “is not an insurmountable problem for the major oil producers,” but it will prove “uneconomical” for smaller, legacy ones.
The Energy Transition Act, meanwhile, represents a kind of mini-Green New Deal applying to the state’s utilities. It sets standards mandating that their energy production be carbon-free by 2045 and halfway there by 2030. Grisham characterized the ETA as a “promise to future generations of New Mexicans,” but Scott sees it as a curse.
“You can’t have a petroleum industry and no carbon simultaneously. It’s just not possible,” he argued.
Paul Gessing, president of the Rio Grande Foundation, a free-market New Mexico think tank, told National Review that although the ETA doesn’t “directly impact” the oil and gas industry, it’s representative of broader hostility to it.
As an example, Gessing cited Grisham’s support for the Clean Future Act, which would have mandated that the state reach net-zero greenhouse gas emissions by 2050. While it was not ultimately voted on during this past February’s legislative session, it counted House speaker Brian Egolf as not just a supporter, but a sponsor, spelling a potentially bright future for successor bills in a more heavily Democratic body.
Gessing said he would agree with progressive critics who submitted that New Mexico’s economy is too reliant on the fossil-fuel industry, but to pull the rug out from under it without a plan for diversification would be a disaster.
Democrats “have no real plan” to help the state’s economy “survive that transition,” he said.
“I don’t think that New Mexico if you turned off the taps — you got rid of 42 percent of the state revenues — that we would be able to survive from a budgetary perspective,” continued Gessing.
“The course that we’re pursuing is going to impoverish our constituents with no appreciable impact on planet-wide temperatures,” argued Scott, who said that there would be no way to come close to closing the budgetary gap of a fossil-fuel free New Mexico through other methods, given its small population and the large proportion of its land (about 40 percent) owned by the state and federal governments.
And while New Mexico stands out as perhaps the most glaring example of a state whose constituents benefit from a booming oil and gas industry — and whose Democrats want to hamstring it — there are plenty of others.
In 2011, Pennsylvania instituted an impact fee on the industry that has since generated over two billion dollars in revenue. “We have some of the biggest deposits in natural gas in the country within the Marcellus Shale region, And that money is driven out locally to local counties and municipalities,” said Pennsylvania House speaker Bryan Cutler in an interview with National Review.
A study commissioned by the American Petroleum Institute and conducted by PricewaterhouseCoopers found that the oil and gas industry was responsible for 9.7 percent of the state’s gross domestic product, and provided for around 6.1 percent of Pennsylvania jobs in 2019, contributing to the state’s fiscal health in ways both direct (the impact fee) and indirect (income taxes).
Outgoing Pennsylvania governor Tom Wolf has sought to set a price on carbon and cap emissions at power plants through the regulatory, rather than the legislative, process. In addition to his constitutional objections to the imposition of a new tax, Cutler cited the economic challenges that would pose.
“That is after our basic electricity prices went up anywhere from 30 to 40 percent, depending on what service area you are in, over the last two months,” he noted.
Greg Vitali, a Democratic Pennsylvania state senator, is a strong supporter of curbing emissions through state action, arguing that constituents would be better served by property tax hikes rather than oil and gas revenues. Cutler bristled at that suggestion.
“It’s no surprise that the Democrats want to raise taxes,” he began, “what they’re overlooking is the amount of jobs that are in fact supported by the energy sector.”
“If you raise property taxes; if you don’t have a job, you’re also not paying property taxes,” said Cutler, who also pointed out that higher property taxes mean less affordable housing. He maintained that it’s representative of a larger Democratic detachment from Americans’ everyday concerns in states across the country. Cutler said the plan to simply raise taxes in response to budget shortfalls reminds him of Transportation secretary Pete Buttigieg’s blinkered quick-fix to climate change: “Just go buy electric cars.”
Colorado is another state whose budgets have seen huge windfalls from the oil and gas industry. Annually, it pulls around a billion dollars into the state’s coffers. Senator Paul Lundeen is concerned that Governor Jared Polis and other state Democrats will squander — and even turn away — the opportunities that these windfalls provide.
The state’s severance tax on oil and gas has “collapsed to the tune of hundreds of millions of dollars over the last several years,” as Democrats have moved to throttle the industry, according to Lundeen. “It’s one of the things that is specifically supportive of education,” he told National Review.
That’s because the state government uses oil and gas taxes to cover education costs that exceed the sum raised by local property taxes, and typically, they exceed property tax revenues in their contribution.
In 2018, Coloradans soundly rejected Proposition 112, a ballot referendum that would have created a 2,500-foot drilling setback from homes, businesses, and bodies of water. Less than a year later, Polis signed Senate Bill 19-181 into law, which “sets up a mechanism where bureaucrats and an air quality control board now control the ability to allow or disallow oil and gas development in Colorado,” per Lundeen. “What this did is it shifted the control over oil and gas development in Colorado, to a perspective where it’s essentially an oil and gas prevention model,” he explained.
The results have been cut-and-dried, said the frustrated legislator. “We’ve gone from several hundred permits a year in Colorado, down to four or five a year,” lamented Lundeen, who called Coloradan natural gas “the cleanest carbon molecule . . . on the planet.”
“We’re shutting that down, and we’re now relying on Joe Biden, who is wrecking our economy, to go hat in hand to Saudi Arabia,” he continued.
With high energy costs making an already inflationary economic environment even more unbearable, Democrat’s environmental overreach on the state level could make their already bleak midterm prospects look optimistic.
Lundeen put what’s sure to be a widely broadcast Republican message succinctly: “Energy costs are so high because the Democrats have chosen to choke off inexpensive and, frankly, environmentally well-managed energy.”
And that’s to say nothing of the fiscal cliffs many states would be headed for under Democratic control.
“In Colorado, we’re in the process of losing 90 to 100,000 really good paying jobs in the energy production industry,” said Lundeen. “Where does the tax revenue come from?”