Expanding domestic energy production should be part of any deal to reduce federal deficits, according to the U.S. Chamber of Commerce.
Drilling for more oil and natural gas in the U.S. not only would create jobs, boost domestic manufacturing and enhance national security, it also could bring billions of dollars in additional revenue to the federal government -- money that could be used for deficit reduction.
That's according to Tom Donohue, the chamber's president and CEO, who talked to his board members this morning about Congress can avoid the fiscal cliff and set the stage for a sweeping deficit reduction agreement next year. Spending cuts, entitlement reforms and comprehensive tax reform should be part of that agreement, Donohue said, but energy should play a major role as well.
Energy "is our country's cash cow," Donohue said. Expanding energy production "will create a larger tax base and higher revenues and direct royalties, all of which will make our deficits lower and reduce debt levels," he said.
Deficit reduction can't be achieved just by cutting spending and raising taxes, Donohue said. "We need that third bucket -- and we've got it in energy. And it's fuller and deeper than anyone imagined just a few years ago," he said.
Oil and natural gas production from shale alone generated $237 million in economic activity and $62 billion in government revenue this year, Donohue said, citing a study by the chamber's Institute for 21st Century Energy. Between now and 2035, shale activity could generate a cumulative $2.5 trillion in government revenue.
To get the full economic and revenue benefits of U.S. energy supplies, the federal government needs to streamline the permitting process for energy projects -- 351 have been blocked by permitting delays and other obstacles, Donohue said.
It also needs to expand access to oil and natural gas production on federal lands and offshore areas, and be more "sensible" about how it regulates the industry, he said. Donohue thinks the appeal of energy as a major contributor to deficit reduction will grow "as lawmakers confront difficult decisions on spending and taxes."
"The chamber is going to pull out all the stops in the coming weeks and months to see that it does," he said.
Energy probably won't be part of the solution to the fiscal cliff. But the deal to avoid this immediate problem -- the across-the-board federal spending cuts and tax increases scheduled to go into effect in January -- likely will include an agreement that forces Congress to adopt a comprehensive deficit reduction package next year. That's when revenue from expanded energy production could come into play.
The two big obstacles to using energy as a deficit reduction tool are opposition from environmentalists to expanded production and how to estimate how much revenue the government would generate from it. The Congressional Budget Office, which provides the official numbers on how legislation would affect the federal budget, doesn't have a good way to "score" how much revenue would be gained by expanded domestic energy production. That's because it's hard to predict how much additional oil and natural gas would be produced, and what the future prices for it would be.
But the chamber plans to help CBO come up with a solution for this revenue-scoring problem.
"Through further research and study, we're going to find a way for them to score it properly," Donohue said. "The amount of money is unbelievable," he added.