Hundreds of thousands in Florida remain without power after Hurricane Ian, which crumbled bridges, swept away buildings and caused catastrophic flooding. This one unprecedented extreme weather event alone has cost lives, separated families and may yield nearly $50 billion in damage. And at the same time, taxpayers are still paying fossil fuel companies more than $20 billion a year to do business, and thereby perpetuate more climate catastrophes like this one.
Even now, the U.S. tax code is full of giveaways to the fossil fuel industry. President Biden’s FY 2022 budget proposed eliminating more than $120 billion in tax benefits to the fossil fuel industry. These perks range from tax deductions that incentivize oil exploring and drilling to regulatory exemptions that foist the cost of cleanup of fossil fuel industry operations onto others.
The Infrastructure Investment and Jobs Act (IIJA) Inflation Reduction Act (RA) is an important step forward, reinstating ‘polluter pays’ taxes on the chemical and petroleum industries to remediate contamination from the highly contaminated ‘Superfund sites.’ This tax on industry expired in 1996 and will now generate approximately $38 billion in cleanup funds over the next ten years and save taxpayers from fully funding cleanup themselves.
While that is a key move, Congress has several other proposals it could act on to eliminate a dozen or so remaining fossil fuel subsidies in the tax code:
The End Polluter Welfare for Enhanced Oil Recovery Act, authored by Congressman Ro Khanna, cosponsored by Reps Raul Grijalva and Quigly, would ban tax credits that support the use of captured carbon for enhanced oil recovery (EOR). EOR is a polluting way of extracting remaining oil from a well that has already been subject to conventional drilling methods. A recent survey of oil companies by the House Ways and Means Committee listed tax credits for EOR as one of the most frequently used benefits by oil and gas companies.
Congressmen McEachin, Blumenauer and Castor’s People Over Petroleum Act would eliminate eleven of the most egregious tax subsidies that go to fossil fuel companies each year – from the Intangible Drilling Costs provision that allows independent oil companies to deduct most of the cost of finding a well; to the Percentage Depletion deduction that effectively awards taxpayer dollars to many oil companies for drilling.
Senator Wyden and Majority Leader Schumer’s Taxing Big Oil Profiteers Act would impose a tax on windfall oil profits and eliminate a major subsidy for oil and gas companies called Last-In, First-Out Accounting that allows companies to artificially deflate their profits for tax purposes, and thus escape paying their full tax bill in a given year.
Finally, the End Polluter Welfare Act, authored by Representative Ilhan Omar, will eliminate a host of fossil fuel subsidies and save the taxpayer billions in fossil fuel giveaways.
All four measures are before Congress now and would help fulfill the commitment the United States made in 2021 as a part of the G7 countries alliance to eliminate inefficient subsidies for the oil and gas industry.
With the impacts of climate change harming communities across the United States and around the world, we can help advance clean energy and minimize our dependence on fossil fuels by removing the incentives we still give to the oil and gas industry. We have made the international commitments. We have leadership in Congress with bills to eliminate fossil fuel subsidies ready to go. It is past time to move the commitments and momentum into action.