Oil And Gas Operations Can Fuel Montana's Economic Recovery
Letter To The Editor
August 11, 2021 | View PDF
Aug. 3 - It is no secret that Montana is full of natural resources. Access to an abundance of fossil fuels and renewable resources makes our state one of the nation’s largest energy suppliers, and our communities have long benefitted from the revenue generated by statewide oil and natural gas operations — especially in Richland County.
As Richland County Commissioners, we are well-versed in oil and gas operations and understand just how critical oil and gas tax revenue is for local and state budgets. We are at the heart of Montana’s oil and gas country — 43% of oil and gas is produced here, the highest concentration in the state. In 2015, the total value of oil production in Montana was $1.15 billion. Our county routinely receives some of the highest amounts in state oil and gas tax revenues due to the energy sector’s robust presence here, benefitting our local schools, businesses, hospitals, and other critical institutions.
Suffice to say we know energy.
But we also know that the current debate surrounding the energy industry is swirling around the climate crisis and how to solve it. Federal proposals concerning oil and gas drilling permits, as well as increases to the corporate and Global Intangible Low Tax Income (GILTI) rates, have been put forth to help raise money for infrastructure development and fight climate change.
However, these proposals will do more harm than good to energy states like Montana. Federal policies must ensure a smooth energy transition without hurting the budgets and economies of communities that rely on natural gas and oil production. After such a devastating year filled with immense grief and financial hardship, now is the worst possible time to increase taxes and limit operations for Montana’s oil and gas operators, as well as American businesses, workers, and the supply chains they rely on as we all collectively recover from the global pandemic.
Oil and gas production on federal lands brought in roughly $25 million in tax revenue for state funding this past year. This revenue goes directly into Montana’s General Fund Budget, which provides critical funds for public outlays like education, healthcare, and conservation. In fact, in Richland County we just donated $1 million in oil and gas severance tax revenue to Sidney Health Center for an air ambulance, something that is crucial to reach those in need in a region as large and rural as ours. Without revenue from oil and gas operations, residents in Richland County and throughout the rest of Montana will see their quality of life suffer and their local communities and economies negatively impacted.
Beyond federal leasing changes, the White House has proposed to raise the US corporate tax rate from 21% to 28%. The impact of such an increase would be felt by businesses small and large across Montana and the rest of the country, resulting in reduced wages, fewer profits, and increased costs to everyday workers and taxpayers.
It is estimated that 1.4 million small businesses, employing almost 13 million Americans, would pay the higher tax rate, which hurts consumers’ wallets and impedes recovery efforts statewide on the heels of the pandemic. Additionally, the nonpartisan Tax Foundation estimates that 75% to 100% of the corporate tax is felt by laborers — any increase would fall onto the shoulders of everyday workers.
In addition to increasing the corporate tax, there is discussion over doubling the GILTI tax rate from 10.5% to 21%. This tax is meant to keep the profits of American companies in the country, rather than abroad. At its current rate, it is not burdensome enough to limit growth and competition. However, when coupled with the proposed increase in the corporate tax rate, the result is that American companies would pay some of the highest effective tax rates in the industrial world, limiting development and stifling competition at a time when rivals like China outpace us on the Fortune 500 list.
In their current form, the proposed federal actions on leasing and taxes will hurt all Montanans, whether they are in extractive industries or not. Transitioning to a new energy era will take time and patience, but also sound policy that recognizes the pivotal role that oil and natural gas plays in Montana and other energy states.
Richland County Commissioners, Duane Mitchell, Loren Young, Shane Gorder