The Oil Companies Dirty Energy Proposition is a Job Killer


Posted on 30 April 2010

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By Andrea Buffa

As the fight over California’s landmark global warming bill, AB 32, heats up in advance of an expected ballot measure to delay AB 32’s implementation, a troubling number of news stories and opinion pieces are misrepresenting some of the research that has been done on the economic impacts of AB 32.

An opinion piece by James Kellogg in this week's Capitol Weekly was no exception. Although the op-ed was more carefully worded than some other pieces by groups like the Howard Jarvis Taxpayers Association and AB 32 Implementation Group, it still misrepresents the findings of a study on AB 32 of which I was a co-author when I worked at UC Berkeley.

The op-ed gives the impression that the UC Berkeley study, Addressing the Employment Impacts of AB 32, California's Global Warming Solutions Act, supports the author’s contention that AB 32 will threaten jobs in California. The problem is, that’s not what the study says. In fact, the study concludes that AB 32 will generate enormous opportunities for California by fostering leading-edge technologies, processes and products that can be exported to the rest of the world.

Just last week, several co-authors of the study published an op-ed in the Los Angeles Times asking opponents of California’s groundbreaking global warming law to stop misconstruing the study’s findings. “All the most rigorous research done so far on AB 32's economic impact agrees that the law will have a small but positive impact on the state's jobs.

The main reason is that California households will save money by using products that are more energy efficient — such as appliances that use less electricity and cars that use less gasoline — and they will be able to spend that savings on other goods and services, which will create jobs. In addition, generating energy savingsby doing things like retrofitting buildings produces more domestic jobs than generating fossil fuel energy,” wrote Carol Zabin and Dave Graham-Squire in the LA Times op-ed (A green jobs generator: AB 32 won’t cost the state 3 million jobs, despite claims by opponents).

Kellogg’s point that more studies of the economic impact of AB 32 are needed—especially studies focused on particular sectors of the economy—is a valid one. But there is certainly time to carry out these additional studies and more forward with the implementation of AB 32. And it certainly was not necessary to misrepresent the findings of the UC Berkeley study in order to get this point across.
California workers do need strong public policies that will grow our economy and create millions of high-quality jobs. And the reality is that AB 32 is one of those policies.

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Andrea Buffa is a policy associate with the Apollo Alliance, a coalition of labor, business, environmental, and community leaders working to catalyze a clean energy revolution that will put millions of Americans to work in a new generation of high-quality, green-collar jobs.

The Huffington Post is reporting that when Sen. Lindsey Graham (R-S.C.) jilted his climate-change partners this week, he abandoned more than a few senators and the White House.

But according to the Post article, while Graham attempted to make his action seem like political strategy, it turns out it was actually just the act of a political whore.

Apparently, the shady lady left behind a respectable Senator Graham's first-quarter donors who along with the white house and coalition he stabbed in the back before running home to roll around on a grotesquely large pile of cash covering his tacky california king sized bed.

Almost all of the political action committee money that Graham took in during the first three months of 2010 came from energy companies hoping he'd reach a climate change deal, according to a review of his filing with the Federal Election Commission.

Graham, who isn't up for reelection until 2014, doesn't appear to have been aggressive in his first-quarter fundraising, taking in only $37,000 from PACs. More than $30,000 of that, however, came from energy companies -- mostly nuclear and natural gas companies that would benefit greatly from higher prices for carbon emissions.

PACs associated with Duke Energy, Exelon, Progress Energy, the Edison Electric Institute, PG&E and American Electric Power, among others, contributed heavily to Graham. Missing from his list of contributors are any of the Big Oil companies.

Exelon, a mostly nuclear company, for instance, has estimated it could make an extra billion dollars a year if climate change legislation passes. Higher carbon prices would set off a rush of investments in clean energy companies and a spike in demand for cheap, energy-efficient technologies, which would primarily benefit the lowest emitters of carbon.

The companies that donated to Graham don't seem to be worried that he took their money and ran -- they are just waiting for him to come back around.

"While we are disappointed by this temporary setback, we remain hopeful that the issues will be resolved quickly, and that the U.S. Senate will make passage of an energy and climate bill an urgent priority," said a spokesperson for Exelon, which donated $2,500 to Graham's campaign in January.

EEI and PG&E did not return calls for comment, but Duke Energy, Progress Energy, NEI and American Electric Power all expressed disappointment in the setback and continued confidence in the bill.

"We'd like to think of this as a sort of rain delay," said Mitch Singer, a spokesperson for NEI. "We appreciate the support these three senators have voiced for the legislation, and we have a wait-and-see attitude."

They may not have to wait for long. Senate Majority Leader Harry Reid (D-Nev.) said at a press conference Wednesday that he is going to move ahead with climate change legislation before he addresses immigration, which may pull Graham back on board.

In a speech in Nevada last weekend, Reid told a crowd that he'd be moving on immigration reform, which sent Graham into a tailspin. Though Graham has been a longtime backer of immigration reform and had recently called on Democrats to make it a higher priority, he responded by pulling out of climate change negotiations and also demanded immigration reform be taken off the table.

http://www.californiaprogressreport.com/site/?q=node/7555

Oil and Gas Industry Fights to Preserve Billions in Tax Credits

For the second time President Barack Obama will request from Congress an end to more than $36.5 billion in Federal tax breaks for the nation’s oil and natural gas industry.

The billions in tax credits were passed in 2005 by the Republican-controlled Congress using the reconciliation process and signed into law by former oil man and president, George W. Bush, as part of the massive corporate tax credits widely referred to as the ‘Bush Tax Cuts.’

The industry also is fighting climate and clean energy legislation, claiming thousands of California jobs are threatened by the legislation.

Last year Obama’s proposal to rescind the energy-targeted tax credits died in its first Senate Finance committee hearing, despite Democratic control of both houses.

But this year the Democrats are expected to attempt passage of broad tax reform legislation, which could be a vehicle for the oil and natural gas repeal. Fearing the president may have a better chance in 2010, the oil and gas industry has developed an aggressive new campaign for the fight – one that challenges Climate and Clean Energy legislation, as well.

The campaign is political theater at its best, hardly mentioning oil or gas. Instead, the nation’s energy companies use the same potent argument for opposing the new global warming legislation and continuing tax credits. Jobs.

In the universe of tough decisions over who will have less and who will have none in this year’s national budget debate this should be a no-brainer.

The arguments in favor of the Administration position are straightforward: the US faces a growing deficit with a potentially inflationary impact on the economy yet over $36 billion in tax credits are awarded annually to global oil and gas corporations which comprise an industry collectively reporting record profits, all-time highs on stock prices, new levels of production and shareholder dividends over the last two years and is as a sector ranked among the top ten industries “best weathering the recession,” within S&P 500’s “Leanest Companies” review.

The oil and gas industry, however, doesn’t see the repeal of these Federal tax credits in a similar light, evidenced by the millions the industry has budgeted to spend in 2010 to convince legislators to oppose the repeal and sway voters that this is not a tax on the industry, it is an attack against the more than 9 million American workers.

“These are punitive taxes that deny the industry the very capital they need to turn around and reinvest to create new well-paying jobs and generate additional revenue to the government,” said Jack Gerard, president of the American Petroleum Institute.

The Energy tomorrow.org Campaign

Beginning with an unassuming “bright spot” television commercial that aired throughout NBC’s February Olympics coverage, the euphemistically-named American Petroleum Institute, the oil and gas industry’s lobby arm, launched an aggressive multi-million dollar anti-tax, anti-clean energy, anti-green energy campaign claiming Obama and the Democrats threaten 9.2 million American jobs with the climate legislation and tax repeal proposals.

Not surprisingly, the API commercial never mentions last summer’s gasoline price gouging at the pump or the industry’s record profits over the last two years, including multiple $10 billion dollar plus quarterly profits for industry leaders. The API ad focused on the only issue the industry believes there’s room to sway public opinion during the recession – American jobs.

The ad touts “the one economic bright spot” in the global recession - 9.2 million jobs the institute claims are supported - not by the industry’s multi-billion dollar quarterly profits - but by the $36.5 billion dollar tax credits now threatened by the Democrats.

To support that claim, API initiated a pre-emptive press release protest in December alerting media to the fact oil execs were not invited to the Obama administration’s Job Summit and calling the oversight, “a lost opportunity” for oil execs to contribute the industry’s knowledge on how to succeed without cutting jobs.

“Clearly, the White House missed an opportunity to include one of the biggest employers and wealth creators in the nation,” said API Chairman, Larry Nichols, who also is chairman and CEO of Devon Energy Corp. “The gas and oil industry supports 9.2 million jobs. We know what it takes to create a job, and we know what it takes to preserve a job.”

If you accept the employment figures and economic claims as summarized in the industry’s PartnershipForEnergy.com campaign, the research having been conducted by the industry’s ‘institute,’ API, and offered without verifiable sourcing, the tax credits Obama wants repealed are directly responsible for more than 9.2 million jobs in the United States.

The industry CEO’s who support the new API campaign, include seven of Fortune 500’s Ten Highest Paid CEO’s.

The campaign’s primary assertion, that the record profits, the Obama-challenged Federal tax credits and a host of extra subsidies like the one supporting ethanol production, are not only necessary, they’re needed in order to protect the 9.2 million American jobs “supported” by the industry. Without them, threatens API, these jobs could go overseas

What is not mentioned by API, however, is the 9.2 million “supported” jobs figure was calculated by API, the oil and gas industry lobbying group. There are not 9.2 million jobs in the oil and gas industry. To reach the figure API researchers had to calculate the night clerk at an Arco AM/PM and a crop duster who uses a fertilizer made with an industry byproduct as industry employees, for example. If you consider these workers oil industry employees, then you are thinking like the API researchers who calculated the figure.

The absence of the environmental protections proposed within the pending Clean Energy and other climate-friendly legislation also is targeted by the “jobs” campaign. Any increase in the cost of doing business “will drive these good-paying American jobs from the nation’s shores and economy,” and “translate to a lower tax revenue contribution from the energy sector to our nation’s economy,” according to the API campaign.

“It’s the hard-working American people who have the most to lose if Congress impedes America’s oil and natural gas industry,” API states with Woody Guthrie-inspired, populist rhetoric. “That’s because everything that happens to the industry trickles through the economy and affects millions of jobs. And one of them may be yours,” states the API site. “Stand up for your job at PartnershipForEnergy.com.”

But non-partisan government watchdogs dispute many of the claims made by API’s campaign as either misleading or false, and suggest it is political cynicism to suggest that an industry renowned by Wall Street for the highest earnings–per-employee ratios of any industry is actually a jobs-creating machine.

At its media teleconference held before the White House jobs summit, API Chairman Larry Nichols and API President and CEO Jack Gerard outlined how the oil and natural industry – which the men claim represents 7.5 percent of GDP – “is ready, willing and able to create new jobs and provide the energy that America needs to sustain a successful economic recovery.”

“Our industry does not operate in a vacuum,” Nichols said. “It is integrated with all other industries. Huge tax increases lessen our ability to create jobs. Our industry can’t prosper unless all the other industries, and the consumers, prosper. “Higher taxes destroy jobs, and impair our economy,” said Nichols.

Seeking national public support, the industry’s campaign has customized a list of facts and talking points by individual state, carefully tailoring issues like taxes and jobs.

Unique among them is California, the only state without an oil or resource extraction fee. For California, API’s campaign is careful not to make any annual calculations that could be used by extraction tax proponents.

“This is about California’s jobs,” the industry’s site declares. “In California alone, 752,614 jobs are supported by the industry,” noting those jobs “add $101 billion to California’s gross state product, or 5.5% of its wealth.”

The oil and gas industry’s maintenance and manipulation of California’s 2/3rds majority rule has affected much of the state’s budget process and allowed the industry to stop any legislation in California calling for an extraction tax on the limited natural resource. At 9.9 percent on 240 million barrels of oil extracted each year, the revenue is estimated to be upwards of $1 billion dollars annually. The oil-industry supported 2/3’rds majority rule is credited for the disproportionate legislation of more than 1,500 tax cuts since 1997 and only about 150 tax increases, according to the Los Angeles Times.

API’s figures are careful not to calculate annual totals for anything that might justify the state’s extraction fee. Totals are figured in large, over the full depletion of, the resource in California, in order to ‘wow’ readers into supporting or at least justifying the absence of the state extraction fee and a continuation of the Federal tax credits.

The Oil and Gas industry campaign makes the claim, “The energy and climate TAX legislation will result in a loss of about 192,800 jobs over the next few years,” but the totals are vague and lacking any verifiable source.

According to an informative article by Michael Hiltzik in the L.A. Times , the majority of California’s oil use comes from outside its borders, making the “severance tax means higher gas prices” argument dubious, at best. While gas prices could conceivably rise, they would do so at the same whim and market manipulation from which they’ve always risen, and less occasionally dropped, not because of California imposing a severance tax, but because the industry determined the market can bear it.

“One analysis projects the legislation would reduce aggregate gross domestic product (GDP) by $9.4 trillion over the next 26 years,” claimed the API fact sheet for California, failing to note that 26 years is the expected life of the extraction, before it is depleted.

API has made sure congressional candidates this year recognize the industry’s record profits have allowed the oil and gas industry to increase lobbying capital, now ranking behind only the pharmaceutical industry in spending to influence the nation’s congressional races in 2010.

In fact, the oil and gas industry’s robust production and profit rate increases over the last two years is mirrored in its Washington, D.C. lobbying efforts which saw huge increases in the amount of money spent by the industry in 2009 to influence the nation’s climate change, attain and now retain a plethora of tax credits - and other energy-related issues - adding $36.5 million dollars to the $133 million dollars it spent in 2008.

The industry’s leaders behind this new “support American jobs by supporting our tax breaks” campaign, include seven of Fortune 500’s Ten Highest Paid CEO’s last year, causing more than a few non-partisan legislative analysts to question whether the campaign is political theater or theater of the absurd.

What has not been widely reported, however, is the 9.2 million “supported” jobs figure was calculated by API, the oil and gas industry lobbying group. There are not 9.2 million jobs in the oil and gas industry. If you consider a night clerk at an Arco AM/PM an industry employee, then you are thinking more like the API staff who calculated the figure.

In fact, referring to the oil and gas industry as a jobs creation machine is misleading, if not outright disingenuous, according to consumer rights and government watchdogs.

The industry is routinely credited in business journals for the highest per employee profit ratio of any U.S. industry. The S&P 500’s “Leanest Companies” reports the industry profit to employee average last year was more than $2 million per employee, ($2,056,000) and that includes CEO salaries in excess of $200 million, and that efficiency increased by nearly 30 percent in 2008 when gas prices soared. America’s oil and gas corporations are employee lean, not job creators.

During last year’s debate over Asm. Julia Brownley’s (D-Santa Monica) legislation calling for an oil extraction fee to fund higher education, the argument was made that profits from petroleum companies should be taxed more, not less, because the corporate profits are not merited - neither justified by an extraordinary complexity or by extraordinary innovation. The innovation worthy of profit and most helpful to national security and the economy, industry opponents argued, would be to find substitutes to petroleum, which the government subsidizes the industry to do but which they do with fettered enthusiasm if not outright disdain.

Another target of the industry’s current campaign, however, is the green energy the industry supports when referring to its Federally-subsidized technological innovation, but aggressively opposes as pending green energy legislation. Regarding jobs created through subsidizing new green biofuel technology, blogger RobertBryce.com reports Iowa State University economist Dave Swenson debunked the claim back in December 2007 with a report that showed by 2016 the US ethanol industry might be responsible for about 9,000 jobs.

Swenson told Bryce, “We’ve increased jobs but not by very much and the cost of those job increases are very high because they have been funded by subsidies. There’s precious little evidence that the economy is better off as a consequence of our increased emphasis on biofuels. And there’s more evidence to suggest that we are worse off because the biofuels subsides cost so much and yield so little in terms of energy security and environmental gains.

According to Bryce, who is an engineer by trade, “If you really hate taxes, your national solution should be to force petroleum companies to highly invest in fundamental research for new energies. Petroleum industry is the most profitable because oil is the most useful thing around. Oil is energy and the world needs energy. There is a high demand for energy so energy should be expensive. This does not explain why oil companies revenues per employee (and wages) and profits are so high.

In fact, wages and profits should be greatly lowered by the expected high cost for unextracted crude oil. Cost of crude oil should appear in the balance sheet of an oil drilling company, and then in all the supply chain. Well, crude oil costs do appear in terms of concessions. But they are way undervalued. As an approximation you can neglect these costs.

For more on the American Clean Energy And Security Act of 2009 (Waxman-D) and it’s related and supporting legislation, go to: http://www.opencongress.org/bill/111-h2454/show

I think the right thing to do is to put programs in place that give jobs to people who will be losing their jobs, and they will lose their jobs, that offer the same pay and benefits as before. It is only right. If you are going to change everything you cannot put lives at stake while doing it. online casino