EnergyFactor By ExxonMobil | Pespectives has a new home

Clearing up confusion about subsidies

It’s a new year, and we have a new Congress – but unfortunately a lot of the same misinformation about energy taxes and subsidies is still circulating in public debate. Many journalists and pundits keep repeating the line that oil and gas companies receive more energy subsidies than other forms of energy, especially renewables. It’s an old line, and more importantly, it’s not true according to a range of U.S. government reports.

The importance of energy to our daily lives will continue to stimulate public debate about energy policies, and taxes and subsidies will continue to be hot topics. Therefore, it’s important we all have the facts to inform these debates. A number of U.S. government agencies and organizations have recently published studies on these issues, and they contain some very useful facts. The studies include:

These reports help demonstrate several key points:

  • Of the $16.6 billion spent on U.S. energy subsidies over the course of one year, fuels such as renewables, refined coal, nuclear, and others accounted for more than 85 percent of subsidies — while oil and natural gas received about 13 percent, according to the EIA study published in 2008. At the same time, oil and natural gas met well more than 60 percent of U.S. energy needs.
  • Many items claimed as “subsidies” for oil and gas are in fact tax provisions that apply to many organizations and industries across the board. For example, the New York Times editorial page claimed in July 2010 that the oil and gas industry’s biggest subsidy was the manufacturing income deduction under Section 199 of the tax code — without pointing out that the New York Times qualifies for exactly the same provision. In fact, disqualifying oil and gas activities from this standard provision would discriminate against our industry and our workers – it’s not removing a “subsidy.”
  • U.S. policy interventions, such as the continued taxpayer support of ethanol, come at a high direct cost. U.S. EIA data showed that while natural gas and petroleum received only $0.03 (yes, 3 cents) per million BTU, ethanol/biofuels received $5.72 per million BTU in energy subsidies. In 2009 alone, biofuels received $6 billion of federal subsidies via tax credits according to the Congressional Budget Office, and if existing policies continue, taxpayers’ support for corn-based ethanol biofuels will total more than $30 billion in the next five years.

ExxonMobil seeks a level playing field with policies that apply even-handedly to all American companies, and advocates for that position as a matter of principle. Like many other companies in the U.S. oil and natural gas industry, we add billions of dollars a year to the U.S. economy through our tax obligations and our investments. We will continue to support all economic energy options and broad-based innovation — not arbitrary subsidies or penalties — as a better approach to meeting needs for reliable, affordable and clean energy.

  • Worth a deeper look...