“Big Giveaways To Big Oil”
July 15, 2010, 4:00am

The Progress Report

by Faiz Shakir, Amanda Terkel, Benjamin Armbruster, Zaid Jilani, Alex Seitz-Wald, Tanya Somanader, and Pat Garafolo

Last month, a proposal by Sen. Bernie Sanders (I-VT) that would have cut $35 billion in taxpayer subsidies to Big Oil companies was soundly defeated in the Senate by a 35-61 vote, with every Republican and 21 Democrats voting against it. “Twenty-two percent of the children in this country live in poverty, we have record-breaking deficits, we have a $13 trillion national debt, and Exxon-Mobil receives $156 million in a tax refund after making $19 billion in profit,” Sanders said at the time. Indeed, due to a series of tax expenditures (spending programs that are administered through the tax code) and other favorable tax treatment, billions of taxpayer dollars are transferred to an oil industry that has made record profits in recent years and whose product pollutes the environment and can cause catastrophes like the ongoing spill in the Gulf of Mexico. These subsidies are nothing more than corporate giveaways, and cutting them would have a negligible effect on domestic oil production or the wider economy. “Profitable and powerful oil companies, such as BP and ExxonMobil, pay lobbyists millions of dollars to scare lawmakers into believing that ending subsidies to oil companies will wreak havoc on the American economy,” wrote Center for American Progress Senior Policy Analyst Sima Gandhi. “The evidence suggests otherwise.”

SAVING TAXPAYER DOLLARS: As the New York Times reported, “an examination of the American tax code indicates that oil production is among the most heavily subsidized businesses, with tax breaks available at virtually every stage of the exploration and extraction process.” In fact, there are at least nine different subsidies that the U.S. government gives to the oil industry, including refunds for drilling costs and refunds to cover the cost of searching for oil. And this occurs despite the massive profits that oil companies have reaped in recent years, with ExxonMobil breaking and then re-breaking the record for most profitable company in history. Oil companies can even apply one subsidy to the cost of tertiary injectants — which increase the amount of oil that can be extracted from a well — essentially “giv[ing] companies government money for acting in ways that will enhance their profits.” BP, which is responsible for the spill in the Gulf, was able to write off 70 percent of the rent it paid for the failed Deepwater Horizon rig, saving it hundreds of thousands of dollars per day (while the company that owned the rig, Transocean, was simultaneously using tax havens to avoid U.S. corporate taxes). “The flow of revenues to oil companies is like the gusher at the bottom of the Gulf of Mexico: heavy and constant,” said Sen. Robert Menendez (D-NJ), who has introduced The Close Big Oil Tax Loopholes Act, “which would eliminate nearly $20 billion worth of big oil tax subsidies.” If all tax subsidies for the oil industry were discarded, the government would save $45 billion over ten years.

NO DROP IN PRODUCTION: The oil industry often argues that cutting subsidies would result in a drop in domestic oil production, thus raising costs for customers and causing the loss of oil-related jobs. However, according to the Office of Economic Policy at the Department of Treasury, cutting the subsidies would affect domestic production by less than one-half of one percent. In fact, the United States produces about the same amount of oil now that it produced in the 1950s, despite billions in subsidies that were handed out over the past 30 years. As for prices at the pump, the Joint Economic Committee looked at one particular tax subsidy — which was intended to preserve U.S. manufacturing jobs but is continually claimed by oil and gas companies — and found that, “In the long run, the removal or modification of the tax deduction is unlikely to have any effect on consumer prices for oil and gas.” Job loss from removing the subsidies is also likely to be minimal, since there would be little change in production. Even President George W. Bush, a former oil man himself, noted in 2005 that oil industry profits, not subsidies, drive company behavior and investment. “With $55 oil we don’t need incentives to the oil and gas companies to explore. There are plenty of incentives,” he said.

BIG OIL’S LOBBYING: Big Oil, of course, is using a phalanx of lobbyists to ensure that its subsidies keeps flowing, with the American Petroleum Institute launching a series of ads portraying the removal of them as increased energy taxes. “What would new taxes on oil and gas mean to to you?” one ad asks, followed by a woman who answers, “Well, I’m against it because it would really hurt our economy.” “It’s to try to tell a story that energy consumers will be harmed,” said Adele Morris, policy director for climate and energy economics at the Brookings Institution. According to the New York Times, the oil industry has spent $340 million over the past two years lobbying against cuts to subsidies. However, as a new report from Citizens for Tax Justice pointed out, Big Oil’s tax breaks “serve only to boost profits for their shareholders,” and don’t go towards lower consumer prices or more investment in energy. “In fact, in the top five oil companies, managers direct most of their excess cash to dividends and stock repurchases, both of which drive up the companies’ share prices and the executives’ stock option values,” the report states. “There is no evidence that the additional profits lead the companies to explore for more oil so that they can increase the supply. Nor does the current tax treatment of oil and gas companies encourage them to develop alternative energy.” The Senate can halt these taxpayer handouts to Big Oil by repealing them as part of a comprehensive energy bill, and the savings can fund incentives for clean energy technologies.

Under the Radar

SOCIAL JUSTICE — OBAMA HAS A HIGHER RATE OF APPOINTING WOMEN AND MINORITIES TO THE COURTS THAN ANY OF HIS PREDECESSORS: Following their habit of keeping President Obama’s nominees from being able to do their jobs, Republican senators are currently plotting to delay a vote on Elena Kagan’s Supreme Court nomination by one week. Two days ago, the Philadelphia Inquirer highlighted the GOP minority’s widespread success in blocking Obama’s judicial appointees for federal courts, calling it “a fierce, largely ignored battle” interfering with Obama’s “goal of sharply altering the composition of the mostly white-male federal judiciary.” As the Inquirer notes, Obama has had a higher “rate of appointing women and people of color…than those of any of his predecessors during their first year of their terms.” Almost “half of Obama’s 73 appointments to the federal bench have been women, 25 percent have been African American, 11 percent Asian American, and 10 percent Hispanic. About 30 percent of Obama’s nominees were white males.” Over President Bush’s two terms, two-thirds of his court appointees were white men. Unfortunately, Republicans have shown a historically high level of obstruction in blocking Obama’s appointees through filibusters and other parliamentary tactics. While Presidents Carter and Reagan had 91 percent of their judicial appointees confirmed in their first year of office, Obama has had only 36 percent approved. Republican obstruction has been, of course, not limited to the judiciary — the Senate only recently confirmed enough federal nominees to “fill more than three-quarters (76.8 percent) of…526 high-level federal jobs,” according to the Washington Post’s Al Kamen, still leaving nearly a quarter of positions unfilled. Kamen adds, “The percentage of women in top jobs increased…to 32.6 percent in the most recent tally,” which “compares with about 46 percent in the first year of Bill Clinton’s administration and 26 percent at the same point for George W. Bush.” Last week, Obama released a statement saying, “It’s unfortunate that at a time when our nation is facing enormous challenges, many in Congress have decided to delay critical nominations for political purposes.”

Think Fast

Nearly six in 10 voters say they lack faith in President Obama to make the right decisions for the country, according to a new Washington Post/ABC News poll. Regard for Obama is still higher than it is for members of Congress, but just 43 percent of all Americans now say they approve of the job Obama is doing on the economy.

At least 1.4 million Americans have been unemployed for 99 weeks, the maximum period that an unemployed worker is eligible to receive unemployment insurance. “Their numbers have grown sixfold in the past three years.” Nearly 46 percent of the 14.6 million unemployed Americans have been out of work for more than six months.

Democrats appear to have “won the 60 votes” needed to pass Wall Street reform in the Senate. With Republican Sens. Olympia Snowe (ME) and Scott Brown (MA) announcing their support on Monday, Democrats will not have to wait for the late Sen. Robert Byrd’s successor to secure better oversight of the financial system in “the second major legislative overhaul, after healthcare reform.”

A “bipartisan crusade” to end “secret holds” used to “surreptitiously block bills” has been “thwarted” five times by one Republican Sen. Jim DeMint (SC). In his newest attempt to block the “anti-secrecy amendment,” Demint offered a “wild card” amendment on the “hotlining process” that could “jettison reform by providing senators with an excuse to vote against it.”

Interior Secretary Ken Salazar “issued revised rules on Monday for a six-month moratorium on deepwater oil drilling in the Gulf of Mexico, replacing an earlier one that had been declared invalid by federal courts.” The new rules “would allow some drilling rigs to resume operating” if the rig’s owners prove that they have met certain safety standards.

“Federal bank regulators have agreed to give the Federal Deposit Insurance Corp. unlimited authority to investigate banks,” lifting a 2002 agreement that barred the FDIC from “examining banks that were deemed financially healthy by their primary regulators.” The agency is currently $20.7 billion in debt after facing a wave of bank failures caused by the “toughest economic climate since the 1930s.”

Afghan president Hamid Karzai has ordered an inquiry following reports “that Afghan forces fired on international troops Tuesday in the country’s south, killing several coalition soldiers.” “If it is confirmed, it’s a very unfortunate attack and the government of Afghanistan will do everything to make sure the proper traitors are brought to justice,” said Karzai spokesman Waheed Omar.

An Israeli military investigation into its raid of the Gaza-bound humanitarian aide flotilla last month “found that it was plagued by errors of planning, intelligence and coordination but that the killings of nine Turks on board were justified.” Investigators faulted the Israeli military for not knowing who was on board one of the ships.

“I’ve never been this serious” about running for president, former House Speaker Newt Gingrich said yesterday. “It’s fair to say that by February the groundwork will have been laid to consider seriously whether or not to run.”

And finally: Comedy Central adds a new satirical news show to its lineup. Set to premier in the summer of 2011, the comedy program “Jon Benjamin Has a Van” will mock newsmagazine programs like “Dateline” and “20/20.”

Blog Watch

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PBS will offer a three-hour valentine to George Shultz, with right-wing backing.

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The debt commission is eying a mostly cuts package.

Daily Grill

“Why has the Navy not been dispatched?”
— Fox News’ Glenn Beck, 7/12/10, wondering why the U.S. Navy has not been assisting with the Gulf oil spill


“Navy assets have been involved since day #1.”
— The Department of the Interior, 5/01/10