Stop Subsidizing Oil

In Ethanol, government by Cindy

I was sitting at the airport Tuesday night, waiting on a delayed flight back from the Iowa Renewable Fuels Summit in Des Moines and desperately trying to ignore the tired and whiny two-year-old at the gate, as well as the live broadcast of the State of the Union address on the TV monitor.

When President Obama mentioned clean energy, however, I started paying attention to him, in spite of the 2-year-old. “We have subsidized oil companies for a century. That’s long enough,” the president said. “It’s time to end the taxpayer giveaways to an industry that’s rarely been more profitable, and double-down on a clean energy industry that’s never been more promising.”

My jaw hit the ground. It was a theme I had heard repeatedly at the summit during the day, starting with the opening address by Iowa Renewable Fuels Association (IRFA) executive director Monte Shaw. “Today the oil industry enjoys billions of dollars in tax subsidies while the renewable fuels industry has none,” said Shaw, proceeding to name off all of the subsides unique to the oil industry.

It’s a long list that requires a high-price accountant to understand – not a problem for the oil industry! Percentage depletion allowance, marginal oil well incentives, enhanced oil recovery credits, intangible drilling costs expensing, deduction for tertiary injectants, exception from passive loss limitations for oil and gas, etc. According to a DTN analysis, the total comes to about $17.9 billion a year.

All of it goes back to the inception of the tax code in 1913. What that means is simply that these subsidies, unlike the meager tax credit that helped the ethanol industry for a fraction of that time, are EMBEDDED in our tax code. They are never going to expire.

So, that begs the question of whether Congress will ever do anything to get rid of those subsidies. It will not be an easy process. But, like the president said, a century is long enough. If the ethanol industry is now mature enough after about 20 years to stand on its own, surely the oil industry can do so.