The Fossil Fuel Dilemma

Guest post by David L. Debertin,

California again easily could become one of the top three fossil fuel producing states in the nation, but the largely liberal state has made drilling for fossil fuels within the state very difficult if not impossible. So the drillers have wisely looked elsewhere for locations that pose less of a political burden. North Dakota and its leaders welcomed the drillers. The result is tax dollars flowing into the state treasury from a variety of oil-related taxes levied not only on the drillers, but on individuals receiving mineral royalty income. In the past dozen years or so this has meant that taxpayers outside the oil producing counties have seen state-level taxes drop and the state can pursue projects that benefit the residents in a host of different ways simply by using funds that would not have been available had the drilling not occurred.

The new revenue coming into New Mexico as a result of recent oil drilling on the New Mexico side of the Permian basin via fracked oil wells is a more recent phenomena, only about 3-years old. The dilemma is that New Mexico has long been left-leaning politically whereas North Dakota has been a right-leaning state. Left-leaning politicians when they hear about new state revenue from an unexpected source generally think about new government program benefiting certain favored groups (maybe the younger voters who tend to favor left-leaning politicians) rather than lowering other taxes (sales, income) that would benefit a broader base of residents both young and old. Hence, we have the New Mexico idea of offering free college tuition to the state’s residents using oil-related tax revenue.

Of course, the in itself idea of using revenue obtained from “criminal” fossil fuel drillers is anathema to the left, but somehow that needs to be all politically balanced against the benefits that particular favored groups of state residents would receive from the fossil-fuel revenue without raising the tax rates on the traditional taxes (sales, income, property) levied at the state or local level. If one is convinced that the oil drillers are the root cause of carbon dioxide emissions and therefore climate change and need to be stopped no matter what, then there are a lot of difficult-to-resolve inconsistencies with at the same time with the state encouraging more drilling and fracking of wells as a potential newly found revenue source for granting free college tuition. The left-leaning politicians favoring more state level big government programs such as free college tuition paid for from taxes levied on fossil fuel production can hardly try to encourage more fossil fuel production because the drillers are the “criminals” that are the root cause of climate change! And the left-leaning students cannot accept the free tuition without being OK with drilling for the fossil fuels which generates the tax revenue making the free tuition possible!

This gets even more complicated in a state like California. Over the past decade, California has largely wound down most of the new drilling on the grounds that this is what is necessary to save the planet. Yet the state has some of the highest state-level taxes in the nation, and sorely needs the revenue it is foregoing from taxes on oil drilling. Still, California is a much more populous state than either New Mexico or North Dakota, and even if significant new drilling were to take place, the impacts oil the new oil-related tax revenue on the rest of the state would be way less than in states like New Mexico and North Dakota where energy extraction income plays a major role for both the state treasuries and for the residents. Money obtained by mineral royalty owners gets spent and re-spent within each state, greatly benefiting businesses not directly connected to fossil fuels–shopping centers auto dealers etc—the list goes on and on.

New Mexico is just now coming to grips with what the state is about to do with all this newly acquired “dirty” fossil fuel income. It will be interesting to see how all of this plays out for sure.

David L. Debertin

Dr. David Debertin is best known as the author of the book, “Agricultural Production Economics” which is widely used everywhere around the world by upper division and graduate programs in agricultural economics.

BS (1969 Ag. Education-Agronomy ), MS (1970 Ag.Economics), North Dakota State University
MS Thesis: Cost-Size-Quality Relationships Affecting North Dakota Schools (Thor Hertsgaard, director), 1970 PhD, Purdue, August, 1973, Ag. Economics
Editor, Journal of Agricultural and Applied Economics 1993–1995 Volumes (with Angelos Pagoulatos and Barry Bobst)
Editor, Review of Agricultural Economics for the 1997 and 1998 volumes. Co-founded the Review of Ag. Economics in the current format under AAEA sponsorship (with Angelos Pagoulatos)

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30 thoughts on “The Fossil Fuel Dilemma

  1. Not only are they forgoing a revenue source if they limit oil and natural gas drilling, but they are using people’s monthly electric bills as their piggy bank to give money to special interests that then turn around and give some back to them in campaigns support.

    The solution to the dilemma though is easy.
    Vote the bastards out of office.
    Problem solved.

  2. Yikes all Australians must be super criminals then because we have already set a new record for exports of Coal for a year and we have 2 months to go. Makes you wonder how much higher they are going to go post US-China trade war as world trade resumes normal numbers.

      • So far the TruDope solution has cost taxpayers 4.5 billon dollars and nothing has been built.

        As a result Weatern Canada has lost hundreds of billions of dollars in export royalties while Easter Canada has spent hundreds of billions of dollars importing oil.

        Those hundreds of billions could have built hospitals to cut down on wait times and saved many Canadian lives. Instead we get Mr. Selfie prancing on the world stage, telling us to say “people kind” instead of “humankind”

      • But he has only bought the existing pipeline not built the expansion pipeline. So our liberal government paid 4.5 billion and has done nothing.

    • True. Criminals! But at least it’s not burned in Australia. I’m sure the Chinese technology is cleaner than the Australian tech anyway.

    • As a climate-skeptical New Mexican, I am glad for the success of our oil/gas industry. We have a high “gross receipts” tax in NM, a kind of totalitarian sales tax on everything one does, which both depresses economic activity for business (tax includes business to business purchases of goods and services and even home building) and is cruel to the economically marginal.

      Using the evil carbon money to reduct the gross receipts tax would be a boon for all. Even the pols would have more money to play with in the long run due to a boost to economic growth with higher tax revenues down the road. Sad that our state is now deep blue.

  3. Maybe North Dakota is a ‘right-leaning state’, but not really and it wasn’t at one time. The Finns who farmed near Stanley out in the western half of the state were not Republicans. All of western North Dakota was solid Democrat back in the fifties and sixties.

    “The man who came up with the new idea was probably Albert Bowen. He and Arthur C. Townley had been organizers for the Socialist Party. Bowen and Townley resigned from the Socialist Party to organize the Nonpartisan League (NPL). Soon, Townley was driving around North Dakota in a Ford Model T meeting with farmers to encourage them to join the NPL.”

    Nonpartisan League

    The Nonpartisan League was born in North Dakota, the ‘goat that can’t be got’ was its slogan. Went on to become the Progressive Party up in Canada.

    Ever since the Great Depression, Socialists have always had a foothold in North Dakota.

    Williams County residents elected a socialist as sheriff back the 30s.

    Ella Reeve Bloor lived in North Dakota for a brief time, she was also a communist and married a man from North Dakota who was also communist. She also ran for governor of Pennsylvania, Ella was the top American Communist, hands down.

    The Nonpartisan League was sympathetic to the socialist movement that was definitely a part of North Dakota politics. First the Republicans were in league with the Nonpartisans, then later on, the Democrats in North Dakota joined them.

    Some information to clear some air.

    An old news story in a local newspaper from early 1928 had information of a well dug for water near Williston ended up with oil in it too.

    Henry Bakken was the farmer who owned the land where the first Bakken well was drilled back in the 1953. Hence, the Bakken Formation.

    North Dakota has a Republican controlled state gov, but it is hardly a place where right wing nutters are running all over wreaking havoc. It is the Socialists who do that. lol

    Too cold for six months out of the year, takes its toll on how people do things.

    Fossil fuels help a lot to stay warm during the winter months.

    • Good post. My kin is from south of “Why Not Minot” and during the Pre-Bakken days life was farming and struggle. Then the Govt showed up to put in missile silos and a culture clash ensued. For a while, very smart people arrived raised everyone’s standards and left.

      After the oil drillers arrived, the standard of living is incredible. The weather still stinks 6 months out of the year and some fools put up windmills to kill some birds and destroy the beauty of the prairie 🙁

  4. Tiny Williston, ND ranks #3 in Kiplingers survey of millionaires per household (~10% of the 15,000 households are millionaire status). Dickinson, ND ranks #24.

    The brand new, world class high schools in Watford City and Williston are stunning examples of what is possible when clear thinking political leaders collaborate with private industry for the betterment of all.

  5. Huh, so oil is ok as long as the greens get free stuff, like free education, but when they don’t get free stuff, then oil is bad 😐 Imagine a world without oil or oil money, economies would collapse over night. I’m still waiting for a group of scientist’s to break through to the media main stage, and prove that CO2 is nothing but a scam, and that the trillions which will be wasted could be spent on better infrastructure, like more fire fighting planes for Australia and California who are both seeing massive fires… PG&E are to blame for California is seems, but I’m not sure what started the Australian fires??? Can CO2 magically start fires??

  6. New Mexico is not a left wing state. Overall, NM is centrist and tends to flip and flop back and forth from slightly left of center to slightly right of center. The current governor is a Democrat, the previous governor for two terms was a Republican. Like many states, NM has regions that are predominantly Democrat and regions that are predominantly Republican, and regions that flip flop back and forth. The oil and gas production is found in both the SE quadrant of the state and in the NW quadrant of the state

    In other words, New Mexico is like the majority of states in the US, at least politically speaking. In other ways NM is very unique with its combination of three dominant cultures – that of the Anglo-American, the Native American, and the Hispanic. Unlike much of the US today, the Hispanic culture is not of recent origin derived from foreign immigration, but rather a continuous 423 year long settlement.

  7. One of the smartest things that ever occurred in the US was the private ownership of minerals. In almost every other country in the world 100% of the minerals are owned by the government. So the government decides who drills (if anybody) and what gets drilled. Then all royalties go to the government which is best at squandering money. In the US landowners decide who drills and when. And since they reap the rewards it’s usually right now. All those royalty dollars paid into the pockets of ordinary citizens get used to increase the size of the economic pie in ways that government spending could never accomplish.

  8. Free tuition hardly makes the cost of college acceptable , especially for the 75% who gain no training of value for the real world.

  9. if it were not for fossil fuels, the world could NEVER support 10 billion energy guzzling people.

    If going the renewable energy route and if nuclear is off the table, then the pollution has to be reduced to about 2 billion energy sipping people within about 100 years.

    Big incentives ($2500 or more) are needed to induce women to have a FREE minor operation so they would have fewer or no children.

    It looks like even Democrats are beginning to see the light

    http://www.truenorthreports.com/green-new-deal-dems-toss-their-support-behind-report-pushing-to-fast-track-population-control

    • Population control by groverment programs is the worst thing a groverment could foisted on it people. Raising the living standard of the poor is a far better way to do it. Of course to do that you need cheap energy. Last limiting the worlds population also will limit the world’s human inovation. In the end population control only leads to a cold dark world. A world sane people do not to leave to future generations.

      • Mark,
        This would be NGOs raising money worldwide and distributing it worldwide to women who voluntarily agree to have a free operation.
        Those women could use the money to learn a trade, get an education, get some work experience, and later on could adopt children.
        No one gets killed.
        Birth rates, especially in poorer countries, would decrease.
        After a few decades, world population growth would become zero, and then negative for as long as it takes to give the other flora and fauna a chance to survive, grow and thrive.

          • Paul/Mark,

            I agree making everyone well off would reduce population growth, but making 10 billion people well off would further imperil the other fauna and flora, which need large UNSPOILED areas to thrive.

            The present 7.8 billion, growing at a little more than 1%/y, already had a major adverse impact on flora and fauna.

            Even if they had zero growth that impact would increase as GWP increases, and more and more people would do more traveling, spreading out, etc.

          • willem post: Have you, therefore, sterilized yourself, your family, your parents and all of their descendants?

    • Ok. Now, how many people are necessary to support a high-tech economy? I’ll bet it’s more than 2 billion.

      And you are wrong about the “minor operation”. Ironically, with regards to the socialists that push the low-population fraud, the best way to reduce a country’s population is to make it rich. Rich people, especially if they have good retirement options and health plans, have fewer children. The birth levels in every Western country, plus Japan and even China, are dropping precipitously. (Only the U.S. is above replacement, and that is mostly due to immigration).

  10. CA is exceptionally obtuse on the omelet dilemma.

    “The public shall be provided with free omelets, but the breaking of eggs shall be strictly forbidden.”

  11. How many actual scientists on this forum? Anyone that has actually done some studying? A whole bunch of people here denying because its convenient to do so. Watch chasing coral on Netflix. Or you know what – dont bother. If in 20 years all the coral is dead, at least have the gumption to admit you were wrong. As will I if the inverse is true.

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