Thread: Big Oil and Tax Breaks
#1 Big Oil and Tax Breaks03-08-2012, 01:49 PMBy Randall Hoven
To hear the president and Democrats talk, you'd think that Big Oil was sucking the Treasury dry with huge subsidies. Almost a year ago I wrote about the federal government's "subsidies" to Big Oil. I said then, "They are all tax 'breaks'... about $4.3 billion per year -- about 0.2% of this year's deficit and enough to fund about 10 hours of current US government spending."
I was wrong. The tax breaks for all fossil fuels was not $4.3B in 2011. It was only $2.5B -- about 0.19% of that year's deficit, and enough to fund only six hours of U.S. government spending. The source for such heresy? The Congressional Budget Office.
Just to be clear, that $2.5B was not just for Big Oil, but also for Big Coal and Big Gas: all fossil fuels. Here, more exactly, are those subsidies, in the CBO's words.
"Expensing of exploration and development costs for oil and natural gas." ($0.8B)
"Option to expense 50% of qualified property used to refine liquid fuels." ($0.8B)
"Option to expense investment costs on the basis of gross income rather than on production." ($0.9B)
I can't say I understand those "subsidies." Is exploration not supposed to be a cost of doing business for an oil company? Who is to say these expenses are not legitimate costs? But let's take the CBO's word for it that these are, for some reason, "subsidies."
Let's compare those subsidies to other energy subsidies. The CBO has a chart.
How is obama working out for you?
#2 CBO Debunks Myth That Tax Code Favors Oil Over Renewables03-08-2012, 08:15 PM
renewable energy is far more heavily subsidized by tax carveouts than any other energy sector, including fossil fuels
Ending Energy Tax Subsidies
The Energy Freedom and Economic Prosperity Act of 2011 would remove all distortionary energy tax policy—meaning any tax policy that picks certain industries as winners and losers in the market—by allowing the energy tax credits set to expire at the end of 2011 to expire and by expediting the sunsetting of all other energy tax credits that extend beyond December 31, 2011, to the end of 2012. Furthermore, the legislation would offset those repeals and expedited sunsets with a broad corporate income tax cut. The legislation eliminates the broad array of energy tax credits available today, such as:
Transportation Sector. Tax credits exist for alcohol fuels, biodiesels, renewable diesels, hydrogen, and other alternative fuel mixtures, as do credits for certain plug-in electric vehicles, alternative motor vehicles, and alternative vehicle refueling infrastructure.
Oil. The oil and gas industry has two directly targeted tax credits that are intended to kick in when the price of a barrel of oil falls below a certain price. One is an enhanced oil recovery tax credit, in which oil producers receive a 15 percent tax credit for costlier methods and technologies, such as injecting liquids and carbon dioxide, into the earth. The other is the marginal well production credit for wells that produce 15 or fewer barrels of oil per day, produce heavy oil, or produce mostly water and fewer than 25 barrels of oil per day. Representative Pompeo’s legislation rightly repeals both tax credits but stays away from broad tax credits the oil industry receives that apply to many industries.
Renewable Energy. Throughout the years, Congress changed the Internal Revenue Code to provide a number of tax credits for large-scale and small-scale renewable generation projects including solar, wind, fuel cells, geothermal, and other qualified sources. The legislation also rightly ends the energy grant program. In lieu of receiving a tax credit, section 1603(b) of the American Recovery and Reinvestment Act of 2009 offered a direct grant from the Treasury for 30 percent of a renewable energy project’s qualifying cost.
Nuclear. The Energy Policy Act of 2005 provides a 1.8 cent-per-kilowatt-hour tax credit for advanced nuclear power produced during the first eight years of production. Although no producer has taken advantage of the credit—since industry has not built an advanced nuclear reactor that has come online—the bill is right to remove the credit.
Qualifying Gasification and Advanced Coal Projects. Tax credits are in place for gasification technologies that use high temperatures to convert coal, petrochemical residue, or biomass into a gas composed primarily of hydrogen and carbon monoxide used for industrial purposes and synthetic fuels. They are also in place for advanced coal projects that use integrated gasification combined cycle, a process that turns coal into gas, or projects that employ carbon capture and sequestration technologies, among other qualifying projects.It's not how old you are, it's how you got here.
It's been a long road and not all of it was paved.
Live every day as if it were your last, because one of these days, it will be.
|« Previous Thread | Next Thread »|