Reconciliation bill includes $6 billion in taxes, fines and fees on oil and gas industry

Industry group warn the bill’s provisions are “ill-conceived and punitive” and will constrain the future supply of petroleum-based products.

Updated: October 17, 2021 - 10:42pm

About $6 billion in new taxes, fees and fines specific to the oil and gas industry are on the table in President Joe Biden's $3.5 trillion budget reconciliation plan pending in Congress.

Four groups representing hundreds of oil and gas businesses have urged Congress to scrap the plan, arguing it will impact supply and increase prices on thousands of oil-based products that will hurt the poor, elderly and tribal groups the most.

In a letter to the House Natural Resources Committee, representatives from Western Energy Alliance, U.S. Oil and Gas Association, International Association of Drilling Contractors, and the Energy Workforce & Technology Council argue that imposing hefty “ill-conceived and punitive fees, royalties, and penalties in an effort to raise just six billion dollars in revenue” will constrain the future supply of 6,000 products derived from oil that Americans use every day.

With the price of crude oil at $80 a barrel, and expected to reach $100 a barrel or more, costs are only going up, not down, they said.

But costs for fuel and goods don’t have to increase if U.S. companies produce oil and gas without the restrictions imposed by the Biden administration, the groups said.

These oil-based products “will continue to be manufactured but with the use of petroleum products imported from Russia and Iran,” the groups said.

“The Administration has talked at length about supply chain constraints,” they add, but fines and fees imposed by the administration would “constrain the future supply of 6,000 products we all use every day.”

According to the U.S. Energy Information Agency, products derived from petroleum include transportation fuels, fuel oils for heating and electricity generation, asphalt and road oil, and components for making the chemicals, plastics, and synthetic materials that are used in nearly all products on the market.

In 2020, of the approximately 6.6 billion barrels of total U.S. petroleum consumption, 44% was finished motor gasoline (including fuel ethanol), 21% was distillate fuel (heating oil and diesel fuel made from crude oil and biomass-based diesel fuel), and 6% was jet fuel.

The remaining 29% came from over 13 other types of petroleum.

To put this in perspective, one 42 gallon barrel of oil creates 19.4 gallons of gasoline. The remaining half of the barrel is used to make more than 6,000 products.

Some of the products whose prices will go up as a result of $6 billion in taxes, fines and fees, according to the group, include all electronics, luggage, office supplies like ink and pens and computer chips, increasing the costs of computers.

Commercial and residential products such as paint and paint brushes, floor wax, safety glasses, linoleum, caulking, roofing, curtains, electricians tape, fertilizer, insecticides, tires, mops, rugs, toilet seats, pillows, upholstery, refrigerators, dishwasher parts, all made from oil, will go up.

The cost of health-related products like rubbing alcohol, aspirin, medicine, heart valves, medical devices, bandages, anesthetics, surgical masks, dentures, antiseptics, hand sanitizers, antihistamines, cortisone, and artificial limbs, all made from oil products, will go up.

The cost of personal items like clothes, hair coloring, perfume, sunglasses, lipstick, soft contact lenses, purses, shoes, roller skates, shampoo, deodorant, toothpaste and soap, all made from oil products, will go up.

The cost of other products like balloons, tents, fishing rods, footballs, football cleats and helmets, golf balls, parachutes, telephones, cameras, candles, and drinking cups, all made from oil products, will go up.

The cost of every single product derived from oil will go up, negatively impacting the working-middle class and small business owners, already reeling from rampant inflation, the groups argue.

As a result of imposing $6 billion on the industry, “Tens of thousands of minority jobs will be lost,” the groups argue, and “rural communities will be decimated.”

Likewise, “tribal budgets will be eviscerated and the Native American allottees who receive royalty payments will lose those payments each month, trapping them in poverty.”

In an effort to keep gas prices low, the Biden administration asked OPEC+ to increase oil production in countries where far less stringent environmental safeguards are in place.

The committee did not respond to the groups’ request.

Instead, it approved its part of the bill by a vote of 24-13. Its proposal, among other things, increases fossil fuel royalty rates, extends royalties to methane emissions, charges fees on offshore fossil fuel pipelines and idled oil and gas wells, and creates climate resilience and restoration and mitigation projects each costing hundreds of millions of dollars.

Committee Chair Raúl M. Grijalva, D-Ariz., said their proposal responded to “environmental justice” needs and would “invest in millions of American jobs” and put the U.S. “on a more stable long-term economic and environmental path.”

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