One of President Donald Trump’s most urgent policy priorities is to cut taxes for businesses and workers. It’s a promise that Republicans must fulfill if they want to restore American prosperity. But the tax plan—which one of us, Moore, helped write—has a $2 trillion to $4 trillion revenue shortfall over the next 10 years. Faster job and GDP growth, both spurred by those tax cuts, will help halve that gap. But where will the rest of the revenue come from to make sure the GOP doesn’t blow an even bigger hole in the budget deficit? That’s an issue Republicans aren’t even close to resolving.
One idea that some in the Trump White House have floated, import tariffs, would be profoundly unwise. But there is another revenue jackpot to be tapped, one right below us—our vast energy resources. Thanks to the technological revolution that has made shale oil and gas a readily available asset, the United States is now sitting atop the biggest trove of recoverable energy of any nation in the world.
After carefully reviewing the best geological surveys, both from government and from private research groups such as the RAND Corporation, we estimate that by expanding energy development on federal lands the government could raise as much as $3 trillion in royalties, leases, and taxes over the next 25 years. That revenue would help reduce the budget deficit, pay for tax reform, and finance the infrastructure improvements that both parties say they support.
A pro-drilling energy strategy could also raise GDP by $150 billion a year and reduce the U.S. trade deficit sharply. The $200 billion Americans spend each year on imported oil could be cut to near zero within five years. The Institute for Energy Research estimates that as many as six million new trucking, welding, pipefitting, engineering, and construction jobs could be created. Most of these would be union jobs, and many would pay $60,000 to $100,000 a year. That would be more jobs than the entire employed workforce in Michigan and Ohio, combined.
It is hard to imagine any competing national policies that could deliver anything like this kind of economic dividend while also delivering badly needed government revenues.
Skeptics say this is pie in the sky. But think about what has happened already with American energy production thanks to the shale oil and gas revolution. From 2008-2015, oil and gas output shot up 75 percent. Thanks to game-changing drilling technologies including hydraulic fracturing, advanced mining techniques, horizontal drilling, seismic imaging, and CO2-enhanced recovery, America could, for decades to come, be the world’s largest supplier of oil and gas.
According to the U.S. Energy Information Administration, the U.S. Geological Survey, and think tanks such as RAND, the resources in states including Alaska, California, Colorado, Texas, and Utah, as well as under the outer continental shelf could hold, altogether, more than 1.5 trillion barrels of oil and some 3 quadrillion cubic feet of natural gas. This is at least 50 times annual U.S. consumption.
Many drilling projects are ready to go immediately. The president simply needs to issue the permits. This would be a direct reversal of Barack Obama’s actions that, by the stroke of a pen, curtailed drilling on federal lands. In his final weeks in office, Obama signed an order barring offshore oil and gas drilling in huge regions of the Arctic and Atlantic oceans. That last edict alone could deprive the United States of an estimated 27 billion barrels of domestic oil and tens of trillions of cubic feet of natural gas.
Just to be clear: We are not talking about drilling in Yosemite or Yellowstone or, as President Obama once joked, next to the Washington Monument. Drilling would happen in areas not environmentally sensitive.
How much is it all worth? Using the Energy Information Administration’s most recent estimates, and assuming that oil prices migrate back to about $100 a barrel over the next 20 years, the total value of oil and natural gas on federal lands and in U.S. waters is at least $50 trillion, according to a study from the Committee to Unleash Prosperity.
This output from drilling would bring into the federal treasury $1.5 trillion from oil and gas royalties charged to oil drillers and another $1.7 trillion in direct federal income taxes from energy producers and their workers. Lease payments would raise nearly $40 billion, bringing total revenues to more than $3 trillion over 25 years.
Our estimate is similar to an analysis performed in 2015 by the Institute for Energy Research, which found that over the next 37 years, the oil and gas on federal lands could generate $4 trillion in federal revenues.
No tax increase could raise anywhere near that kind of money without seriously impairing the economy.
The “fiscal dividend” from drilling has worked in places to reduce taxes. Norway gets a huge percentage of its revenues from oil drilling. Alaska doesn’t impose a state income or sales tax because of the billions of dollars the state government receives from drilling.
It is true that oil prices are low (about $50 a barrel, down from $105 two years ago) and new drilling has slowed dramatically. But oil markets have always gone through busts and booms. As fast-developing nations such as China and India grow richer, demand for oil is likely to surge in the future.
More importantly, drilling technologies keep getting better and better: Frackers are discovering ways to make money even at prices below $40 a barrel.
The Obama administration’s anti-fossil-fuels policies created roadblocks to drilling and to energy infrastructure projects, such as new pipelines. About 90 percent of shale oil and gas drilling over the past decade has been on private lands because of Obama’s obsession with climate change and his desire to end fossil fuel development.
The only argument in favor of those policies would be concern over climate change. But as shale oil and gas production have gone up, greenhouse gas emissions and other pollutants have gone down, thanks to the surge in natural gas as a clean, cheap, and reliable source of electricity. Still, it would make sense to dedicate a share of the trillions of dollars of revenue gains from drilling on federal lands to discovering ways to reduce the impact of carbon in the atmosphere, through innovations such as carbon recapture.
An energy policy can be designed in a way that helps pay for tax cuts, expands high-paying jobs, fuels growth, and protects the environment. If the president and Congress seize this $3 trillion opportunity to make America energy independent, it could be one of their greatest legacies.
Stephen Moore is coauthor of Fueling Freedom: Exposing the Mad War on Energy and a senior fellow at the Heritage Foundation. Jackson Coleman is managing partner of EnergyNorthAmerica LLC. He was formerly general counsel of the House Committee on Natural Resources and served as a senior energy attorney at the Department of the Interior.
This post originally appeared on Weekly Standard