Members of Congress Press for End to Fossil Fuel Subsidies

In a letter to House Speaker Nancy Pelosi and Majority Leader Steny Hoyer today, 54 members of Congress called for an end to more than $120 billion in tax handouts to the fossil fuel industry. 

“Fossil fuel subsidies are a bad deal for American taxpayers,” the legislators wrote, adding that they “should be repealed because, instead of enhancing American energy independence or creating jobs, they simply enhance the profits of fossil fuel companies.”

The letter follows President Biden’s proposal to cut $121 billion in taxpayer subsidies for the fossil fuel industry.  Giveaways targeted for elimination include:

  1. Tax loopholes for Foreign Oil and Gas Extraction Income (FOGEI) and Foreign Oil-Related Income (FORI) rule: This giveaway in Trump’s Tax Cuts and Jobs Act exempts foreign oil and gas extraction income from taxation. It lets oil and gas companies bring home profits from international oil and gas drilling without paying any U.S. taxes on them.1 This exemption applies to just a few of the largest oil and gas companies. President Biden’s FY 22 Budget estimates it will cost taxpayers approximately $84 billion over the next ten years if not eliminated.
  2. Expensing of Intangible Drilling Costs: Congress created this special tax giveaway more than a century ago, allowing oil companies to deduct costs for developing an oil and gas well or a mine faster than they otherwise would be able to. Independent producers can deduct the costs in the year they are incurred, and integrated companies can deduct 70% of these costs immediately. Eligible costs include expenses incurred while surveying to locate wells, building roads for the drilling site, preparing a site for drilling, excavating mines, and costs of drilling a well, and make up 60-80% of total drilling costs.2 The Stockholm Environment Institute estimates that this subsidy alone increases the profitability, or internal rate of return for oil and gas fields across the country by 8-11%.3 President Biden’s FY 22 Budget estimates that this deduction will cost taxpayers approximately $10.5 billion over the next ten years if not eliminated. 
  3. Percentage Depletion for Oil and Natural Gas Wells: This giveaway allows oil, gas, and coal companies to deduct a flat percentage of the income they generate from a well or mine instead of deducting a percentage of the value of the well or mine itself. The income from a well or mine can greatly exceed the value of the well or mine itself, so companies are often able to deduct more money through this percentage depletion deduction than the well is worth. President Biden’s FY 22 Budget estimates this deduction will cost taxpayers approximately $10.3 billion over the next ten years if not eliminated.

After an Earth Day Hearing on the need to cut fossil fuel subsidies chaired by Rep Rho Khanna (D-CA), more than 500 organizations called upon Speaker Nancy Pelosi and Leader Chuck Schumer to include cuts to fossil fuel subsidies in the upcoming budget reconciliation bill. 

Climate change is widespread, rapid, and intensifying, according to a pivotal report by the U.N. International Panel on Climate Change this month. In responding to the report, U.N Secretary General António Guterres said, “Countries should also end all new fossil fuel exploration and production, and shift fossil fuel subsidies into renewable energy.”

The House should heed its members’ call and eliminate these subsidies.  A budget reconciliation bill that asks Congress and federal agencies to end federal fossil fuel giveaways will fuel change. It will help put the United States on the path to meaningfully tackle climate change, stave off the worst impacts of climate change and set the country on a path to a clean energy future.



About the Authors

Sujatha Bergen

Director, Health Campaigns, Health and Food Division

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