Drilling Our Way to a Transportation Bill is a Wrong Turn

Last week Congressional Republicans proposed two bills aimed at generating revenue to boost federal transportation infrastructure funding. Both bills would require an expansion of oil and gas drilling. Both are bad news.

One bill, offered by Rep. Steve Stivers (R-Ohio), would remove a congressional moratorium on energy production in the eastern Gulf of Mexico and require lease sales in certain areas in the Pacific and Atlantic (such as off the Virginia coast)  that were delayed or canceled by the Obama administration. The plan would allow any state with drilling off its shores (in addition to the Gulf of Mexico states currently covered) to receive 37.5 percent of the revenues. The other legislative proposal, by Reps. Doc Hastings (R-Wash.) and Don Young (R-Alaska), would open up sections of Alaska's National Wildlife Refuge to allow oil and natural gas development on 3 percent of the North Slope reserve.

Both bills are in accordance with a push by House Speaker John Boehner (R-Ohio) to expand and increase drilling in return for using the new revenues to help cover the country's massive infrastructure investment needs. The House Natural Resources Committee is slated to hold a hearing on the bills this Friday.

[UPDATE: Today Rep. Steve Stivers (R-OH) announced that he is introducing a third drilling-for-infrastructure bill: the "American-Made Energy and Infrastructure Jobs Act," which he says will solve the transportation funding problem by opening up “untapped oil resources in the Outer Continental Shelf that will raise revenue from new off-shore drilling leases and provide a new dedicated source of revenue to fund infrastructure projects.”]

Without a doubt, finding the money to pay for transportation projects is quite a challenge. The current federal tax on gasoline purchases cannot fully cover the costs of repairing and upgrading -- let alone expanding – our country’s vast network of bridges, roads and mass transit systems. Failing to efficiently move people and products around the country hurts America’s economy and costs all of us time, money and patience.

There does appear to be bipartisan support in Congress for reauthorizing surface transportation legislation in the coming year, however the GOP plan has seen opposition from Democrats and likely would not make it through the Senate or past the White House. Likewise, NRDC strongly rejects the notion that linking the highway bill to expanded domestic energy production is the way to meet the nation’s transportation needs.

Republican Highway Bill a Ploy to Push Reckless “Drill, Baby, Drill” Agenda

Our nation’s road and rail system is old and worn out. Right now, the biggest source of funding to fix that infrastructure is the federal gas tax. The 18.4 cents per gallon user fee, which was last changed in 1993, is not likely to be raised in the current political climate. As a result, the $50 billion-plus annual shortfall in transportation revenues continues to grow, with the Congressional Budget Office estimating that the Highway Trust Fund could be insolvent by 2013.

But using oil and gas revenues for highways isn’t a sensible way to address the problem. Here’s why Congress should reject the GOP’s “drill to drive” scheme:

  • Oil and gas royalties represent the largest source of federal revenues after taxes, with companies paying $6 billion to the government last year. Under the Republican proposal, the flow of new royalties would be diverted away from the U.S. Treasury to fund transportation. That lost revenue will just have to be made up somewhere else or it will increase the deficit.
  • Even with new royalties, those drilling revenues would be a drop in the bucket toward the $1.7 trillion that the American Society of Civil Engineers estimates is needed between now and 2020 to rebuild transportation systems that are reaching the ends of their life cycles. A report last year led by former federal transportation secretaries called for a $262 billion annual investment—an amount far in excess of the few billion dollars in annual revenue that would be generated by new drilling.
  • The promise of more royalties from expanded energy production provides needless incentive to drill offshore at a time when oil and gas companies have a huge amount of unused leases on land in the U.S. that they are choosing not to use. Clearly, those areas should be tapped first before opening more of America’s coastal waters—and special places like Alaska’s Arctic National Wildlife Refuge—to energy development. 
  • Funding to pay for transportation is needed immediately. But even assuming that more drilling were allowed, it would take several years before any oil and gas royalties would start flowing.
  • Drilling for transportation funding runs counter to the way oil revenues have been used when they have not just gone into the general fund. Historically, these revenues have been put to uses—like the Land and Water Conservation Fund—to mitigate environmental damage from drilling. Even conservatives in the past have proposed uses like renewable energy research and conservation that are designed to eventually reduce the use of oil. Using the royalty fees to pay for highways would only fuel the demand for more drilling and worsen our addiction to oil.
  • Philosophically, tying drilling to transportation flies in the face of the tried-and-true “user pays” principle that has governed transportation funding for decades. President Ronald Reagan touted this very principle in his successful effort to secure a five-cent per gallon gas tax increase in the early 1980s. Shifting from “user pays” to “taxpayer pays” would result in infrastructure expenditures being constrained by budget considerations and governed by political preferences.

If congressional Republicans are really serious about forcing the oil and gas industry to help foot America’s transportation bill they should favor cutting federal fossil fuel subsidies—and redirect the savings to invest in infrastructure. After all, tax breaks and loopholes for Big Oil will cost the federal treasury $40 billion over the next decade. That is not nearly enough to solve our nation’s transportation challenges, but it would be a significant contribution.