Letter to Senate "Gang of 10", Re: Drop Proposed Severance Tax

Letter

Sen. Hutchison, Six Gulf Coast Senators Urge "Gang of 10" to Drop Proposed Severance Tax
Gulf Coast Senators: Tax will Reduce Production, Limit Supply and Raise Energy Prices

U.S. Senator Kay Bailey Hutchison (R-TX), Texas' senior senator, and five Gulf Coast Senate colleagues today sent a letter to the authors of compromise energy legislation, the so-called Senate "Gang of 10," urging them not to target production in the energy-rich Gulf of Mexico with a severance tax that will reduce production, limit potential supply, and raise energy prices.

Senators John Cornyn (R-TX), Thad Cochran (R-MS), Richard Shelby (R-AL), Jeff Sessions (R-AL), David Vitter (R-LA), and Roger Wicker (R-MS) signed the letter.

"As Senators representing Gulf Coast states, we believe that now more than ever we must increase production in the Gulf of Mexico and a severance tax will have the opposite effect," said Sen. Hutchison. "The proposal offered singles out production in the Gulf of Mexico for the severance tax, which is arbitrary and unfair."

TEXT OF THE LETTER

We commend you on your efforts to work in a bi-partisan effort to formulate a solution to the energy crisis. For too long, Congress has chosen policies that restrict access to domestic oil and gas reserves as a U.S. energy policy. The result has been devastating to families, small businesses, farmers and ranchers who are all struggling to cope with high energy prices. We commend you for discussing new access to proven reserves as a component of an energy package.

As Gulf Coast Senators, we fully understand the need for more energy in the U.S. The Gulf contains 83 percent of federal known offshore oil reserves and 93 percent of federal known offshore natural gas reserves. We are concerned that the proposal before us targets the Gulf States and treats their production in a manner that disregards our states' involvement and leadership in this area of expertise. A severance tax that singles out production in the Gulf is not only arbitrary, but it will discourage production where some of the largest discoveries of oil and gas are known to exist. Reducing production while increasing taxes will limit potential supply and raise energy prices. The proposal could also negatively impact the Coastal Impact Assistance Program (CIAP) agreement which cemented the 2006 expansion of production in the Gulf.

In 2006, we worked in a bi-partisan fashion to allow exploration in the Gulf that was in moratorium. Alabama, Louisiana, Mississippi and Texas came together and agreed on the need for more production in the Gulf. The four states also collectively agreed on a formula for which each state would receive funds under the CIAP for bearing the energy production needs of our country. The carefully negotiated CIAP formula was a key to forging a balanced agreement between all four states.

The Gulf holds vast potential to provide the necessary energy security for our nation and our economy. Now more than ever, we need to increase production in the Gulf. We know the Gulf is home to some of the largest inventories of American oil and gas. Abundantly available, it fuels our cars, heats our homes, and helps drive our economy. Congress should do everything possible to encourage increased production of these resources in an environmentally responsible manner.

We hope you will give serious consideration to the concerns we have as oil and gas producing Gulf Coast States. Thank you again for your attention to these issues.

Sincerely,