Senate Proposal to End $35 Billion in Oil & Gas Tax Breaks

Senator Bernie Sanders (VT-I) has proposed a measure to repeal more than US$35 billion in tax breaks for the oil and gas industry.  

Sanders’ plan would invest $10 billion of the savings in the Energy Efficiency and Conservation Block Grant program and the remaining $25 billion toward reducing the federal deficit.

Sanders, who chairs the Senate EPW's subcommittee on Green Jobs and the New Economy, said that, “If there is anything we should be learning from the Gulf disaster, it is that it is time to move aggressively away from polluting and unsafe fossil fuels, which are getting more and more difficult to produce as we move further and further offshore to drill for them.”

The International Energy Agency (IEA) recently reported that global annual subsidies to fossil fuel industries total about US$557 billion – a number that exceeds previous estimates by 75 percent.  According to the IEA, phasing out these subsidies by 2020 could reduce global energy consumption by 850 million tons equivalent of oil – or the combined current consumption of Japan, South Korea, Australia and New Zealand.

“I see fossil fuel subsidies as the appendicitis of the global energy system which needs to be removed for a healthy, sustainable development future,” said Fatih Birol, chief economist at the IEA in Paris.

The Gulf oil gusher provides an interesting backdrop for this subsidies discussion, and Senators will surely use BP as an example of the perverse nature of propping up mature industries with federal assistance.  Why do BP, ExxonMobil and other oil companies continue to receive what amount to welfare payments from the U.S. taxpayer when they are raking in amazing profits? 

For instance, BP (NYSE: BP) hauled in US$14 billion in profits last year, and that was a big drop from the prior year. Does this industry really need taxpayers to help fund its dangerous activities when the same amount (or less) money could perhaps be more wisely spent on investments in renewables and efficiency programs to ensure a clean energy future?

BP CEO Tony Hayward has said he “think[s] the environmental impact of this disaster is likely to have been very, very modest.”

Never mind the insanity of that statement, for now.  Just imagine how much more modest the environmental impact would be if investments were made to reduce the amount of energy demand in the first place, and to supply the world’s energy needs through clean technologies that don’t carry the risk of a Deepwater disaster. 

Given the entrenched power of the oil and gas industries in Washington, Congress will have its work cut out for it making the oil and gas industry pay the true cost of producing its products and cleaning up after itself, without dipping into the taxpayer’s pocket.

But with the true costs of oil addiction staring America in the face in the Gulf right now, the time to have that conversation is long overdue.
 

Photo credit: Office of Senator Bernie Sanders.