Environmental activists are on the verge of writing their anti-energy agenda into the tax code.
A national activist coalition recently delivered a letter to the Senate demanding the passage of the FAIR Energy Policy Act, which would eliminate $4 billion in annual tax breaks for the oil and gas industry. The letter denounces these breaks as ill-gotten gains, complaining that “for too long, America has subsidized the oil industry’s bottom line at middle class Americans’ expense.”
“Subsidized” is a deeply deceptive term. The fossil fuel industry does not actually receive special tax treatment or handouts. If activists were really concerned with unwarranted government largesse, they would look in the mirror: renewable energy subsidies have proven to be an epic waste of taxpayer dollars.
Oil and gas firms receive zero direct payments from the government. What they do receive is the same production deductions afforded every other business in the American economy. So, for instance, a natural gas company can write-off the costs associated with setting up and running a new fracking well, just as a car company can write-off the construction of a new manufacturing plant.
These deductions have helped fossil fuel firms grow and contribute to the economy. Today, they generate 70 percent of domestic energy output and support over 9 million jobs.
Indeed, far from being rigged for “Big Oil,” the tax code favors smaller, independent energy producers. One provision, which grants a depreciation deduction for energy that has yet to be extracted, is specifically unavailable for large producers.
The tax treatment for renewable firms is a different story. These companies do receive direct public subsidies – huge ones. A 2015 Taxpayers Protection Alliance report detailed $39 billion annually in subsidies just for solar power. Despite a massive and costly government effort to incentivize solar energy, solar makes up less than 1 percent of total U.S. electricity generation, according to the Energy Information Administration.
Environmentalists don’t seem to appreciate the irony. Elon Musk quickly emerged as an activist icon after establishing Tesla, the fashionable electric car company. Musk has dutifully blasted fossil fuel companies, famously saying that “if I cared about subsidies, I would have entered the oil and gas industry.” And yet, Musk’s companies have received nearly $5 billion from U.S. taxpayers.
Instead of providing energy independence, those taxpayer dollars have bankrolled dozens of high-profile failures. The solar panel company Solyndra consumed nearly $849 million in low-interest federal loans and tax breaks before going under in 2011. Today, SunEdison, a solar and wind company that has received $1.5 billion in subsidies, is on the verge of bankruptcy. In total, nearly three dozen renewable firms that have received funding from the Obama administration have gone bankrupt, are approaching bankruptcy, or have significantly downsized.
“We could send 166,000 kids to college every year with the $4 billion that is instead squandered on Big Oil,” says Brad Woodhouse, the President of Americans United for Change and a signatory to the recent Senate letter. That’s some stirring rhetoric, but that’s all it is – rhetoric. Traditional energy companies don’t get special treatment. They’re simply afforded the same tax treatment as the rest of the business community. Renewable producers are the real welfare addicts. Activists need to check their facts.