EnergyFactor By ExxonMobil | Pespectives has a new home


Andrew Sharpless’ recent op-ed on wind power subsidies is long on rhetoric but short on facts.

Let me get one thing straight – I have nothing against wind power. In our own Energy Outlook, we forecast that renewables will be among the fastest-growing energy sources and play an important and expanding role in the energy mix.  To meet growing energy demand around the world, we will need all economic sources.

But to claim that our government upholds “unfair policies that favor Big Oil” – and largely neglects renewables like wind – is simply false.

According to a 2008 report issued by the U.S. Energy Information Administration, wind power is a top beneficiary of government support:

“Electricity production subsidies and support per unit of production (dollars per megawatt hour) vary widely by fuel: Coal-based synfuels (refined coal) that are eligible for the alternative fuels tax credit, solar power, and wind power receive, by far, the highest subsidies per unit of generation, ranging from more than $23 to nearly $30 per megawatt hour of generation.”

EIA Energy Subsidies Chart

By comparison, natural gas and petroleum liquids were reported to receive just 25 cents per megawatt hour of generation.

Furthermore, the stimulus package signed into law last year provides at least $1.64 billion of taxpayer money through Department of Energy distributions to renewable energy sources, including almost $120 million for wind energy projects and a wind technology testing center.

What about the subsidies Sharpless claims the oil industry reaps?  The facts tell a different story. What he’s calling “subsidies” are simply tax provisions that apply to almost all industries across the U.S. – but that the Administration and some in Congress are proposing to eliminate only for the U.S. oil and natural gas industry.

One example, which I’ve discussed in a previous post, is the manufacturing tax rate reduction provided through section 199 of the tax code. It applies to every taxpayer that “produces, manufactures, grows or extracts” almost anything in the U.S. – including the manufacturing of wind turbines and the generation of electricity from those turbines, as well as the production of newspapers. But if the Administration has its way, the U.S. oil and natural gas industry won’t qualify for this reduction while the wind industry will.

Or, consider the Administration’s efforts to effectively eliminate the foreign tax credit – again, only for the U.S. oil and gas industry.  If we selectively remove this credit – which applies without exception to every U.S. taxpayer to prevent double taxation on earnings overseas — oil and gas companies based outside the United States, like BP, would actually gain an advantage over American companies. How does that make sense?

Sharpless himself makes a call for “stable tax and investment incentives” and “predictable, practical regulatory structure.” But it’s clear that the only thing stable and predictable is the Administration’s continual efforts to single out the U.S. oil and gas industry to pay more than their fair share of taxes – while providing increasing subsidies to renewable energy sources.

I welcome reader comments on the arguments I’ve made here – and I invite Mr. Sharpless to a discussion about the facts on subsidies in the oil and gas industry.

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