Environmental Outlook: Oil Subsidies and the Future of U.S. Energy Policy
http://thedianerehmshow.org/shows/2011-02-01/environmental-outlook-oil-subsidies-and-future-us-energy-policy
President Barack Obama is calling for an end to tax breaks for oil companies to help finance clean-energy research projects. As part of our Environmental Outlook series, we look at the big business of oil subsidies and their role in U.S energy policy.
Guests
Kate Gordon
vice president for energy policy at the Center for American Progress
Jack Coleman
The Managing partner at EnergyNorthAmerica, LLC and a former federal lawyer for energy policy issues
Amy Harder
reporter, The National Journal
Comments
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Circumstances in the world we refuse to alter extort oil subsidies from us.
Aid to Egypt and Israel under a peace treaty amounts to an oil subsidy.
Our two wars of occupation are mostly an oils subsidy.
Half of our defense budget is an oil subsidy because of the nations we have to protect, like Saudi Arabia and Kuwait, and even Nigeria. Add the costs of keeping totalitarian regimes in place to keep the people from demanding oil royalties.
Alaska is an oil colony where citizens receive a royalty (oil bribe) each year (makes for strange politics).
The taxpayer portion of the clean up in the Gulf is an oil subsidy. Conservatives would argue that BPs costs are also a subsidy, since they will pass it on to consumers.
Tax breaks and tax exemptions to the petroleum industry are another big subsidy.
The GM and Chrysler bailouts could be viewed as an oil subsidy because they promote demand. As could highway building by the government.
People dream about changes in the type of energy we use but it seems the capitalists have sunk all four paws in this tarbaby and are about to try a head-butt.
Every nation subsidies its domestic fossil fuel exploration and production due to the strategic importance of this resource. What will be the impact of a unilateral cut in subsidies on US competitiveness in the global economy as well as the need for US energy independence in an increasingly unstable world?
Clean coal and corn-based ethanol are nothing but political pet projects with no economic logic.
Prices go down constantly too.
Gas prices rise in the summer due to reformulated fuel requirements as well.
What do we do when the sun isn't shining and the wind isn't blowing? Fossil fuels are great because they are stored energy.
Please discuss the evidence of water contamination due to runoff from solar farms from the chemicals used in the manufacture of cells and film.
I really enjoyed the 3-on-1 dynamics today. Diane really got herself into the fray and put Jack on the defensive.
I see a parallel between this show and the one before on dietary guidelines.
In both cases, it seems our government is working at cross purposes. We subsidize the very things reasonable people agree we should limit (or at least not encourage by making them cheaper). In diet, an example is subsidizing US sugar production. In energy, it is subsidizing oil production.
In each case, the good of the many is sacrificed for the benefit of the few.
I would like to point out that despite what Mr. Coleman said about companies like Exxon paying large amounts in taxes, it's been reported that Exxon paid nothing in US taxes in 2009, thanks to tax loopholes.
http://abcnews.go.com/Business/Tax/ge-exxon-paid-us-income-taxes-09/stor...
I suspect Mr. Oily meant that the industry pays per barrel / per cubic foot fees for extraction. If he would acknowledge that the "tax" is pennies per barrel (now selling at ~$90 per barrel), he would sound a little more honest.
His core dishonesty: the reason their "taxes" are so "high" is that (as they remove hundreds millions of barrels of oil and billions of cubic feet of natural gas) they make tens of billions in profit.
Mr. Coleman described energy subsidies in a "dollar per MWh generated" in a given year. This is misleading given the dramatic difference in the capacity of wind and solar compared to that of fossil fuel based electricity (coal, oil, and Nat. Gas).
If we want the price of renewable energy to decrease, we must eliminate the subsidies for fossil fuels and allow even market competition to give renewable a chance. In addition, it would be wise to value the negative externalities (greenhouse gas emissions, water contamination from hydraulic fracturing, etc.) that have NEVER been considered in the financial models.
We need to completely revamp our energy structure, and develop a sound energy policy.
The consistent reference to resource depletion is misleading. As has been pointed out, resource depletion is a tax incentive (yes, an incentive) in recognition of the fact that resource companies loose their resource (its non-renewable) each time they produce it. Exploration is an important but expensive and risky aspect of a natural business that does not apply to other businesses. Once they find a resource, that resource is depleted continually.
This argument is really about making traditional energy sources more expensive. Renewables have failed to reduce their costs with R&D and all the subsidies. Hence, their next action is to get the traditional source to become expensive so they can compete. Who looses? The consumer!
I've always felt the National Interstate Highway System, funded by our federal government was the most important subsidy for the oil and gas industry, since the use of most liquid hydrocarbons is for transportation. Without that in-place system, maintained by state and federal governments, transportation fuels may be very different today. Is this a fair observation?
Mr. Coleman continually insists that the oil depletion allowance is not a subsidy. He repeats this over and over. It is a subsidy. He needs to explain in plain language why it is not a subsidy. If this isn't a subsidy then what is a subsidy?
Mr. Coleman was allowed to obfuscate in equating "barrels of oil" with "killowatt hours" when comparing solar/wind with oil. This is in no way a reasonable comparison.
Does the $10 per barrel cost include exploration costs? Also, aren't the huge profits worldwide and not just US income?
Greetings,
Can the panel please explain how we pay so much for a barrel and then, the tax break that the companies get is based on what is in the tanks that is purchased at a lower price? I don't get it. How can oil that we buy this week not be the taxed amount to these guys?
Please ask them to explain what seems to be a scam. Thank you.
Diane,
I'm Mark listening on-line in Guatemala. I live in Brooklyn. As a taxpayer I can't imagine how we ever got into the situation of paying subsidies to multi billion dollar oil and gas companies. They make plenty of money for their efforts. They don't need any help. I also don't buy the equal treatment argument. Solar needs help to develop, wind energy needs help to develop. Oil and gas is mature and can certainly stand on their own two feet. Especially since they are producing what could be considered a public resource and should be taxed for the benefit of the public at large.
What about FRACKING, Diane? If we sacrifice our water table for natural gas we are sunk. It's not much fun being thirsty for 300 years while we import water.
Kate keeps comparing the United States to other countries with regard to Government programs in place to support a specific industry. We are supposed to live in a free market society and it's not the Government's job to create a "market" for a certain product (like wind power for example) out of thin air. Demand will come naturally as fossil fuel prices increase. If the Government starts throwing it's weight behind specific industries, we lose competition, fair pricing, and research. What if they did this with other industries? If the Government were to decide that an armadillo makes the ideal household pet and has countless benefets to human emotional well-being, does that mean they should tax dog kennels more and provide a subsidy for armadillo farms to "create a market" for armadillos? I still want my dog, and I still want my unleaded gas; in the US, my opinion matters.
The question of taxes or subsidies are semantics -- they are the same. The question is what energy policy will this country pursue? Where should our tax incentives be used? World opinion is for the development of renewable energy. Fossil fuels are in decline and will just become more expensive and a bigger drain on our economy. This is why China is looking to wind energy to drive their future econmy.
Mr. Coleman continues to comment that renewable energy is subsidized at a much higher rate than oil. He refers to a "per kilowatt" rate of subsidy when talking about renewables. He talks about "barrels of oil" This is not a valid comparison. If you compared the subsidies to "kilowatts of energy from oil" vs "kilowatts of energy from renewables" then oil is subsidized at a much higher rate.l
For over 30 years the falsehood that the United States has no energy policy has been repeated so endlessly that it is accepted as fact. In truth, after his election to the Presidency, Ronald Reagan appointed as his first director of the Office of Management and Budget then-Representative David Stockman of Michigan. Stockman had written that the energy independence programs of Presidents Nixon, Ford and Carter were based on "cramped, inward looking logic." The cheapest energy in the world, he said, was Persian Gulf oil and the United States should rely utterly on it.
All that was required to guard against interruptions, he said, were "strategic reserves and strategic forces." Today, the strategic oil reserve is full and American women and men are being grievously wounded and killed to keep the oil flowing from Saudi Arabia to the refineries of America. These are massive, inhuman subsidies.
At the same time, Stockman targeted U.S. programs that imposed burdens on the oil industry for what he called "regulatory ventilation" and slashed funding for solar and wind energy. The budget for solar energy, for example, went from several hundred million to zero, literally overnight. Today, the same is happening with regard to global warming, with the United States holding the entire world hostage to its energy policy of "strategic reserves and strategic forces."
Could the panel speak of net-energy use. I'm probably using the wrong terminology. How much energy does it take to extract the shale or fraking of engery resources? I've read that it takes more energy to create these new sources than usable outcome.
Does Fracking have a negative impact on local drinking water / aquifers?
"There was no renewable energy industries a hundred years ago. So there were no renewable energy tax credits, " says the industry spokesperson. I think people were burning wood back then and using wind and hydro. Oil was so powerful a lobby even then that other energy development was stunted and the environmental costs were ignored.
Such ignorant short-sighted statements are showing us how this spokesperson appeals to ignorance.
The lowest hanging fruit is energy efficiency. The duct leakage in American homes annually is equivalant to the oil in the Artic National Wildlife Refuge. (source DOE)
I am not aware of any independent or EPA studies that indicate a systemic risk from fracturing on water quality. There may be individual instances but nothing more widespread.
We must factor in the cost of human life and health as well as of the collateral damage that fossil fuel exploration and exploitation exact. Last year sadly provided suitable examples on U.S. soil.
See here:
http://brainmindinst.blogspot.com/2010/04/energy-mind.html
and here:
http://brainmindinst.blogspot.com/2010/02/smoke-stacks-colleges-sensitiz...
What are these costs worth to us and who will pay the price?
Highly toxic chemicals are used in this process. It's inevitable that some of them get into people's water wells. It's insanity that this nation is willing to jeopardize peoples drinking water while alternative energy research has been neglected for decades. Check out the documentary Gasland.
What ought one expect to hear from a shill for the extractive-energy sector?
Well, here are two facts:
In less than two hours (at ground level), the Earth receives from the Sun more energy than the entire human race consumes in a year.
In 2006, MIT did a study for the DOE that concluded that in the lower forty-eight states, we have from geothermal sources alone, more than one-thousand times the total energy requirement of the U.S. (MIT article and link to PDF of their study - http://web.mit.edu/newsoffice/2007/geothermal.html )
Add to these two sources the ample energy available from wind (as well as other sources, such as ocean thermal gradients and tides). These are ALL inexhaustible sources of energy for as long as we can inhabit this planet; the source-cost of this energy is identically zero; the only costs involved are in harnessing and distributing it.
The "problem" is that the oil, coal and natural gas (and nuclear) energy companies can't put meters on them (and that they are essentially limitless). Why are they fighting the future? M-O-N-E-Y - and the political power that derives therefrom; after all, they own the best politicians their money can buy.
Not even considering the horrendous environmental and ecological damage wrought by the extractive energy cartel, a future generation will look back on this period and say (among other things), "You had this remarkable substance that took eons of time to create and from which can be derived a myriad of useful materials, from feed stock for the chemical industry, to pharmaceuticals, fertilizers and lubricants - and you BURNED it?"
Regarding the oil companies fixing gas prices, a group which I saw on the internet (and later heard or read Ralph Nader say as much) found that in the 1990s the oil companies conspired to raise gas prices by reducing the number of refineries. A few years ago the Detroit News reported that Michigan use to have 12 refineries, and now it has one.
The Chinese are looking at wind energy and other renewables to fuel the country's future growth. They are also building coal-fired power plants and expanding their involvement with oil development in Africa and elsewhere. Look at this pie chart for some perspective:
http://www.eia.doe.gov/emeu/cabs/China/Background.html
Diane: I would like to suggest that the largest (indirect) subsidy that all producers and users of fossil fuels enjoy is the use of the atmosphere as a free dumping ground for exhaust gases which are the major contributor to climate change. We are already paying large costs for climate change worldwide, but none of these costs are reflected in the price we pay for fossil fuels. Another indirect subsidy we all pay relates to military efforts in and around the major oil-producing basins. None of these subsidies would be necessary if we moved to an energy system based on renewable resources.
Ken Piers
Grand Rapids, MI
"Clean Coal" was mentioned in the program as one of the new "clean energy" sources. I believe this was included by the administration in the list of clean energy technologies to appease the powerful coal industry.
There is no such thing as "clean coal". This refers to the expensive and uncertain technology of recapturing the carbon from the coal when it is burned.. The burning of coal, even with co2 capture, still adds mercury to our water ways. And according to the American Lung Association, 24,000 people a year still die prematurely from pollution emitted at coal-fired power plants.
In addition, the extraction of the coal is always a polluting process. The first step in the Mountain-Top-Removal mining process, is to remove forests from the mountain top. These forests are not only "scenery lost", they act to clean excess carbon out of our air, give us oxygen, and provide habitat to diverse wildlife. Then, mountain tops are blasted away, throwing toxins into the air! They are lost to our landscape. The rock and soil blasted away is dumped in valleys, filling them in, further destroying forests and burying streams. Toxins go into our drinking water and into the ocean. Local wells are poisoned. The health of the local communities is endangered. What is left after mountain-top removal is a barren wasteland, with erosion problems. In the end, the coal companies cover the used mine with whatever top-soil substitute is near-by.
The alternative to mountain top removal is to dig deep mines which endanger the lives of the miners. These mines, too, bring up a slurry of poisonous muck that sends toxins into our water supply, poisons wells, etc.
“Clean Coal” is used at a huge environmental cost.