Outrage and budgets

May 29, 2017
To understand oil and gas implications of a White House budget proposal that, in comparison with predecessors, seems sketchy, consider an image from US President Donald Trump's visit to Saudi Arabia.

To understand oil and gas implications of a White House budget proposal that, in comparison with predecessors, seems sketchy, consider an image from US President Donald Trump's visit to Saudi Arabia. In the Royal Court in Riyadh, where western television cameras seldom go, Trump on May 20 stood with Saudi King Salman studying framed artwork entitled "Magnetism." In the etching by Ahmed Mater, steel shavings representing pilgrims surround a magnetic cube depicting the Kabaa in the Grand Mosque of Mecca.

On global television, a western leader thus contemplated a representation of the holiest shrine of Islam in exclusive chambers of the House of Saud. For militant Islamists inflamed by western modernism in the land of Mecca and Medina, the scene had to be outrageous.

Demonstrated talent

Trump played his role naturally. He has a demonstrated talent for using boldness to keep opponents off balance. While investigations were beginning in Washington, DC, into contacts between his election campaign and Russian officials, the president was leaving Riyadh for a stop in Jerusalem before jetting on to the Vatican. What were those investigations about again?

On May 23, meanwhile, the White House published the new administration's first budget proposal. At only 52 pages, the document lacked traditional heft and detail. The oil and gas industry seems to have been spared. After eight annual assaults on its tax underpinnings from the prior administration, the industry had reason to worry about a new promise to "eliminate most special-interest tax breaks to make the tax code more equitable, more efficient, and to help pay for lower business tax rates." That's the kind of language Barack Obama budgets employed to introduce provisions disallowing current-year expensing of intangible drilling costs, other accommodations to peculiarities of the oil business, and a manufacturer's deduction available to nonoil industries. But the Trump budget mentions none of those threats, which might yet resurface as Congress addresses tax reform.

Where the White House budget is specific about oil and gas, it's characteristically bold-even outrageous to targeted constituencies.

The proposal, for example, includes the sale of half the oil in the Strategic Petroleum Reserve to raise money. It thus crushes whatever might be left of the original confinement of SPR withdrawals to supply emergencies. And it assaults a pillar of energy security as understood for years after the Arab oil embargo of 1973. In old contexts, the idea is outrageous. As an expression of executive intent, however, it inaugurates discussion long overdue. Parameters of energy security have changed.

More outrageous, perhaps-at least to affected jurisdictions-is the envisioned repeal of state payments under the Gulf of Mexico Energy Security Act of 2006. For this provision the budget projects savings of $1.685 billion through 2022 and $3.56 billion through 2027.

But topping that on the boldness scale is oil and gas leasing in the Arctic National Wildlife Refuge of Alaska. That prospect has been dormant since the Exxon Valdez tanker accident off Alaska in 1989. And revenue expectations are modest: $400 million through 2022 and $1.8 billion through 2027-about a tenth of what's projected from SPR oil sales.

With US oil supply rising, moreover, ANWR leasing lacks the status it once possessed in discussions about energy policy. The leasing proposal is mainly symbolic. But it's boldly important. It rebukes decades of environmentalist obstructionism. It's as outrageous to ANWR leasing opponents and their keep-it-in-the-ground progeny as the video of Trump and the Kabaa depiction must have been to militant Islam.

New resolve

"Muslim nations must be willing to take on the burden if we are going to defeat terrorism and send its wicked ideology into oblivion," Trump said in Riyadh on May 21, the day before a suicide bomber murdered 22 people in Manchester, England. But Saudi leaders already had signaled new resolve by staging the Kabaa pose.

Outrage has its effects. Outrage channeled through the ANWR gesture can mean more than numbers on a budget line.