Yesterday, Speaker Boehner said that he was open to reevaluating subsidies to oil companies. That's a bold step for a Republican legislator: GOP lawmakers receive a lot of support from the oil and gas industry. In fact, 77% of the $65 million that the industry contributed to politicians between 2009 and 2010 went to Republicans. So the Speaker deserves credit for his stated desire to "see all the facts." And we're anxious to help! Let's take a look at some of the current subsidies to oil companies.
Tax Expenditures ~ $3.96 billion in 2010
Oil companies specifically benefited from $3.96 billion in tax expenditures for 2010. Here’s a breakout of the individual tax breaks and their respective amounts:
Tax Expenditures Benefiting Oil Companies, 2010Subsidyscope.com
As you can see, the largest tax break listed is the expensing of exploration and development costs. Essentially, this allows companies to deduct "intangible drilling costs" (such as wages or the cost of materials when constructing a well) from their taxable income immediately, rather than amortizing the costs over several years (the standard for other businesses). Most other companies are required to amortize their expenses over several years because it more accurately measures the net income for each year.
Non-Competed Contracts ~ $4 billion in 2010
The federal government contracts with oil companies to procure fuel for various branches of the government. This is not a subsidy in itself, but it can be considered a subsidy when the contracts are not fully competed. For 2010, the federal government awarded over $4 billion in non-competed contracts to companies to procure oil and petroleum.
Royalty Relief ~ $ billions
By law, the Department of Interior is required to charge royalty fees for the fair market use of public lands and goods extracted from them (typically between 12.5% and 18.75%). However, there exist special exemptions for oil and gas drilling and exploration, both on Interior land and waters in the outer continental shelf that are also managed by the Department of Interior. The reduction in royalties assessed on oil and gas extracted from government owned lands is called royalty relief. While noting the difficulty in generating an accurate estimate, the GAO estimates the cost of royalty relief is in the billions each year. Just for the deep water areas in the Gulf of Mexico, the GAO estimated $21 billion to $53 billion in losses from royalty relief between 1996 and 2000.
Cleanup Costs That Exceed the Oil Spill Liability Trust Fund ~$??
The Oil Spill Liability Trust Fund is intended to allow the federal government to respond quickly and efficiently to oil spills. The fund is paid for by a tax on oil produced in or imported to the US. However, the fund has a $1 billion per incident cap. According to the most recent GAO report, the total estimated cost of the Deepwater Horizon disaster is in the tens of billions. To date, $629.5 million of the $1 billion cap has been paid out. If the costs exceed $1 billion, agencies may be required to use their appropriated funds or obtain supplemental funding.
Depending on your definition of subsidy, there are many other ways (less easily estimated in dollars) that the federal government subsidizes oil and gas companies. These may include research and development grants, transportation infrastructure such as pipelines or the military defense of oil shipments. Even setting aside these other possibilities, the data is in: Oil companies benefit from billions of dollars worth of subsidies every year.