Experts say N.D. oil industry could survive if no fiscal cliff deal is madeSet to plunge over the fiscal cliff hours before the New Year’s ball drops, many experts say North Dakota’s oil industry could weather tax hikes and budget cuts set to kick in midnight Dec. 31 if there is no deficit deal in Congress.
By: By Betsy Simon, Forum Communications, The Jamestown Sun
Set to plunge over the fiscal cliff hours before the New Year’s ball drops, many experts say North Dakota’s oil industry could weather tax hikes and budget cuts set to kick in midnight Dec. 31 if there is no deficit deal in Congress.
“I don’t think that anything will happen to oil production or that economic development in Stark County would decrease if the government goes over the fiscal cliff,” said Gaylon Baker, executive vice president of the Stark Development Corporation. “The fiscal cliff is referred to by some economists as the ‘fiscal bunny slope.’ I would say calling it a ‘cliff’ is an exaggeration. The fact of the matter is, if Congress works on a fix and has something in place by January or February, I think there will be minimal impacts.
“Don’t forget, this whole situation was created by Congress in the first place. I doubt that oil companies would start plugging their wells and stop exploring for oil here if the country goes over the cliff.”
Fiscal cliff is the term used to describe the economic impact of budget cuts and tax hikes established in the Budget Control Act of 2011 to reduce the national debt that is now more than $16 trillion.
If there is no deal and the forced budget and spending cuts are enacted, public impact would include: the elimination of the temporary payroll tax and some business tax breaks, a rollback of the Bush tax cuts that began in 2002, start of new taxes related to President Barack Obama’s health care law, and spending cuts Congress agreed upon during the 2011 debt ceiling deal would kick in, including slashing the budgets of programs, like Medicaid and defense.
The media relations department at ConocoPhillips in Houston and Emma Meade, senior communications manager for global exploration and development at Hess Corp in Houston, both declined to speculate on specific impacts on the oil and gas production in the wake the fiscal cliff. The local companies also declined comment.
But Kari Cutting, vice president of the North Dakota Petroleum Council, wasn’t aware of any industry-specific ramifications.
“I don’t think we’ve come to any conclusions on what would happen with oil production, but I think we know that (going over the fiscal cliff) would not be good for citizens,” she said. “The real questions, I think, would be in the ability of companies to access capital and if their tax structure would be impacted.”
There’s a lot of uncertainty that comes with the fiscal cliff, said Willis Bush, senior communications advisor for American Petroleum Institute in Washington, D.C.
“It’s unclear what will happen, so it’s very hard to say,” he said. “Broader impacts on the economy and on fuel demand are also hard to estimate.”
Because the oil market is global, though, there is more at play in the price and supply of oil than America’s economic woes, said Rayola Dougher, senior economic advisor with API.
“Going over the fiscal cliff could impact consumer demand and depress the economy in general, but North Dakota is at the forefront of an economic boom and the demand for oil and gas is still there, so I don’t see trouble in North Dakota,” she said. “It is well-positioned for growth, and companies make investments for the long-term and are looking a year or two down the road.
“The demand for oil will be there for a long time, so I wouldn’t borrow trouble at this point. North Dakota, I think, is very solid and the state’s economic development is making a big difference in the country’s fuel supply.”