Left, right duel on elimination of energy tax supports

Source: Nick Juliano, E&E reporter • Posted: Friday, May 11, 2012

Two liberal lawmakers today unveiled what one called the “most comprehensive” bill to eliminate government support for oil, natural gas and coal production, aiming to slash more than $113 billion in tax incentives, research and development spending, and other funding for those industries over the next decade.

Two counterparts from the other side of the aisle panned the effort while pointing to a separate bill they have been pushing for months that would narrowly target two little-used fossil fuel tax benefits while taking the hatchet to a broad array of tax supports for renewable energy.

Each side could claim the backing of at least one outside organization focused on tax reform, and neither proposal is expected to be adopted anytime soon. But the dueling events highlight the rising prominence of the tax code in broader discussions of how the government should make energy policy and could inform eventual decisions on how the oil, gas, coal and renewable sectors would fare if Congress gets serious about engaging in comprehensive tax reform next year.

From the left, Sen. Bernie Sanders (I-Vt.) and Rep. Keith Ellison (D-Minn.) introduced the “End Polluter Welfare Act,” S. 3080, which would eliminate virtually all government support for fossil fuel companies, including subsidies through the tax code, direct spending on research and development, and caps on liability for damage from oil spills. The bill also increases royalties for extracting coal, oil or gas from federal lands.

It would recoup $113.36 billion over 10 years, according to a fact sheet from Sanders’ office. Those funds would go toward deficit reduction.

“As people throughout our country are demanding that we invest in energy efficiency and sustainable energy, and when Congress has instead allowed key sustainable energy incentives to expire even as Big Oil reaps billions in subsidies, it is time to change our national energy priorities,” Sanders said during a news conference on Capitol Hill today. “Our legislation is the most comprehensive ever introduced on this subject.”

Sanders and Ellison were joined by Ryan Alexander, president of Taxpayers for Common Sense, who backed the legislation. Alexander’s group also supports eliminating renewable energy incentives that Sanders and Ellison support, but that subject was largely sidestepped for the sake of focusing on the big fish, fossil fuel.

“Cutting fossil fuel subsidies both eliminates wasteful giveaways to very profitable companies and starts to unravel the system that has protected these handouts for so long,” Alexander said. “For nearly a century, Big Oil and King Coal have fed at the federal trough.”

Meanwhile, conservative lawmakers Sen. Jim DeMint (R-S.C.) and Rep. Mike Pompeo (R-Kan.) continued to push for their bill that would eliminate numerous renewable energy tax subsidies — for alternative fuels, electric vehicles and renewable electricity — as well as two oil industry tax breaks that apply to marginal wells and enhanced oil recovery techniques. Money saved from their bill would be used to lower the corporate tax rate, earning it the backing of Americans for Tax Reform President Grover Norquist, who joined the two lawmakers on a press call this afternoon.

Pompeo said he was peeved by President Obama’s suggestion earlier this week that allowing the production tax credit for wind energy to expire as scheduled at the end of this year would be akin to raising taxes on the industry in violation of the ATR pledge practically all congressional Republicans have signed to vote against tax hikes.

“Nothing could be further from the truth,” Pompeo said, arguing that the PTC is a subsidy inserted in the tax code and that allowing a temporary provision to expire is different from proactively raising taxes.

The two lawmakers and Norquist also panned Sanders’ bill as an effort, as DeMint put it, to “punish political enemies” rather than eliminating support across the board. DeMint also defended his bill’s narrower view of subsidies when it comes to fossil fuels, saying that some of the incentives Sanders’ bill would eliminate apply to a variety of industries and are not just targeted to oil and gas.

Norquist said the PTC needed to go because it was meant to be a temporary, rather than permanent, piece of the tax code. However, he showed there may be some wiggle room in the pledge on the issue of what temporary tax credits should be viewed as if they were permanent.

For example, Norquist said he would not support allowing the Bush income tax cuts to expire as scheduled at the end of this year because their supporters only agreed to a temporary cut to avoid a Democratic filibuster when they were initially passed in 2001 and 2003.

The research and development tax credit is another area where Norquist showed some wiggle room. Though the R&D credit is technically temporary, it has been extended numerous times on a bipartisan basis since its initial enactment in 1981 and is viewed as “settled policy” that would “hurt those industries” that rely on it if it were allowed to suddenly expire as scheduled at the end of this year.

The wind industry has made largely the same argument with respect to the PTC, which was initially enacted in 1992.

Whatever happens with the various tax credits, nothing is expected to gain traction until at least the lame-duck session, when Congress can approach the issues without a looming election. In the meantime, political posturing is expected to rule the day.

“I don’t think either of today’s proposals is a serious attempt to answer the question what is the government’s role in supporting energy, let alone clean energy,” said Joshua Freed, vice president for clean energy at the centrist think tank Third Way. “In both cases, it’s much more energy policy by press release to drive home other previously taken, established political positions.”