Knowing the Difference Between Your (G)ass and a Hole in the Ground

Trey Smith

With states looking to raise taxes on oil and gas production and better regulate the most controversial drilling practices, we can expect industry to soon trot out its tried and true argument against such moves. As they did here in Colorado a few years back when our governor proposed a hike in severance levies, oil and gas companies will promise to leave any place where taxes or regulation increase.

Such blackmail deftly plays to our reflexive fears of job outsourcing — and those fears are understandable. Indeed, in a “free-trade” era that has seen corporate decision-makers dream of putting “every plant you own on a barge” and shifting production to the lowest-wage nations on earth (a direct quote from GE’s then-CEO Jack Welch), offshoring is very real in too many industries.

But, as a new study highlights, when it comes to natural resource extraction, there’s a little secret the oil and gas industry doesn’t want voters to know: namely, that the “we will leave if you tax or regulate us!” threats are hollow when it comes to fossil fuels thanks to their captive status.
~ from Big Oil’s Empty Threat by David Sirota ~

The point that Sirota makes clear -- it's just commonsense, folks -- is that unlike other commodities, oil and gas only can be extracted in particular locations. So, when a petro company threatens to pull up stakes and leave, savvy local politicians should say, "Go right ahead!"

Local officials know that one of the threatening corporation's competitors will be more than willing to swoop in to lay claim to the valuable resource. So, the savvy political move simply is to call their bluff and, more than likely, the threatening corporation will blink.

In this day and age, savvy politicians are few and far between. Oh, they can be savvy alright, but NOT when it comes to public needs. In those instances, they become little more than dupes and most of them will fall hook, line and sinker for even the mildest of threats.

And, of course, the real threat such politicos are worried about has nothing to do with a potential temporary loss of jobs or tax money. No, the threat that has most of them shaking in their boots is the loss of rich campaign contributions!