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Judd Gregg: On oil, a good idea from Washington

by Judd Gregg - 03/23/15 6:00 AM ET

There is a good idea corner in Washington. Really.

Of course, most of the proposals that grow there do not see the light of day, or they are referred to a committee where they go in as apple and come out as a squashed banana.

{mosads}But they do exist. Just to prove it, let me cite one.

Sen. John Cornyn (R-Texas), the GOP Senate Whip and second in command in the majority leadership, is proposing such an idea.

He suggests that, since we now have the capacity as a nation to produce much more oil than we need domestically, we should allow oil to be exported and then tax the exported oil.

Our present laws arose out of the trauma of the oil crisis of the late 1970s, when people had to walk to gas stations to get gas in tin cans because there was not enough to go around. As a consequence, the Congress banned the export of oil.

This had some logic back then, when people saw no reason to be exporting something we really needed here.

But times have changed — and rather dramatically.

We can now produce much more oil then we need. And with the new technologies that produce this abundance of oil, our excess of supply will go on as far as we can foresee.

We have moved up the ladder of economic well-being and energy independence in a way that just a few years ago could not have been imagined.

The reaction in the world energy markets has been remarkable.

The price of oil has tumbled. Saudi Arabia, to whom we have been paying tribute with our hard-earned dollars for generations, is now dealing with a true competitor and has reacted by trying to price high-cost producers out of the market by driving the cost of oil ever lower.

The United States holds most of the cards because we have a great deal of oil. The problem is that we cannot play those cards on the world stage because of our out-dated and counter-productive policy banning exports.

Then, along comes Cornyn with an obvious and constructive solution.

His idea even addresses some regional tensions that have long been present within our own nation in regard to oil.

In the not-so-distant past, the northeast and the rest of the oil-consuming parts of the nation felt rather abused by our neighbors from Texas and other oil regions.

Oil was a necessary but expensive need for heating homes in our lengthy and cold winters, and for driving. There is, therefore, a reasonable amount of cynicism in the northeast regarding the good intentions of our Texan friends on this issue.

But Cornyn’s idea balances these competing agendas.

Lifting the ban on exporting oil in the first place is very attractive to the energy producing regions.

It would also be nice for the country, as it would generate a massive shift in our balance of trade accounts which have been running in the negative for three decades now, primarily due to oil imports.

This would essentially mean that instead of sending money out to the country to support other economies, we would be getting other nations’ money into the country to build our own economy.

Second, the Cornyn proposal suggests taxing the exported oil. I presume this would be at some rate that would keep it under the world price of oil (the Brent benchmark), but above what American’s pay (the WTI benchmark).

Whatever rate is set, it is all ‘found money’ for the federal treasury and it is coming from other nations.

The Cornyn proposal intends to go even further by earmarking these new revenues for capital improvements, such as roads, mass transit, water and sewer systems.

These are things that really do benefit the whole country and especially the northeast, where the infrastructure is under immense pressure.

Also, if done correctly, a small proportion of the funds could go to refurbish our national parks and lands, which are obviously a source of our resources and are in dire need of better upkeep.

Thus, under the Cornyn proposal, just about everyone in America is a winner.

We get to sell our oil in competition against nations that have been gouging us for years.

We get the economic benefit of a vibrant oil-production industry.

We get a huge boost to the nations’ tax coffers that will be used to assist regions such as the northeast in addressing pressing infrastructure needs and helping us build for the future.

It is a good idea.

Let’s hope it is actually passed by the people who govern us, and should be looking for good ideas.

Judd Gregg (R) is a former governor and three-term senator from New Hampshire who served as chairman and ranking member of the Senate Budget Committee and as ranking member of the Senate Appropriations Foreign Operations subcommittee.

Tags John Cornyn