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GOP Proposes $1.6 Billion Cut to EPA Budget, Defends $4 Billion in Oil Subsidies

Republicans unveiled a budget plan on Wednesday that proposed a $1.6 billion cut to the Environmental Protection Agency, an agency whose authority they have sought to curtail, while business trade groups have complained about the burden placed on them by agency regulations. Politico also reported that the GOP's proposal would hit the Energy Department hard, with a proposal to cut energy efficiency and renewable energy programs in half.

Rep. Fred Upton, chairman of the House Energy and Commerce Committee, has said he favors gutting EPA’s authority to regulate greenhouse gas emissions with a “legislative fix” rather than simply denying it funds. (See our overview of Upton’s positions on energy.) He told the Wall Street Journal that his disagreement with the EPA is: “You don't subsidize different forms of power -- you let the market run on its own.”

Energy subsidies are not a new thing, and efforts to remove them for oil and gas companies have repeatedly failed in recent years.

This week, when Senate Democrats wrote a letter challenging GOP lawmakers to end to tax subsidies for oil and gas companies—an agenda item that President Obama also referenced in his State of the Union speech—Republicans balked and equated ending those subsidies with raising taxes, which would “destroy American jobs.”

Oil companies are subsidized by approximately $4 billion each year through deductions and loopholes in the corporate tax code. The New York Times reported last year that tax breaks are “available at virtually every stage of the exploration and extraction process,” citing BP and the ill-fated Deepwater Horizon rig as one example:

BP was reaping sizable tax benefits from leasing the rig. According to a letter sent in June to the Senate Finance Committee, the company used a tax break for the oil industry to write off 70 percent of the rent for Deepwater Horizon — a deduction of more than $225,000 a day since the lease began.

The Deepwater Horizon was also registered to the Marshall Islands, which as we noted meant it received less stringent regulation than a rig registered to the United States. It also provided Transocean, the rig’s owner, with a “financial tax benefit,” the Swiss company told the Guardian.

The American Petroleum Institute, an oil and gas trade group, has called elimination of the tax subsidies “misguided” and has echoed the Republican stance that it would kill jobs and slow economic growth. The group’s president told Politico that API has been busy visiting GOP freshmen to make its pitch for the importance of the industry and feels that “the message resonates.”

Will the GOP not be happy until the entire planet is a smoldering ruin?

What good will all the oil money be if they ruin the planet?

I wonder if there are other benefits to having two sides to your face as the Republicans seem to have.  Like can eat twice as fast, can you take in more air.

We want to cut government spending, except on the things we like or that get us elected.  We don’t like EPA (EPA cannot give me re-election money), but we do like the oil industry (they give me millions in re-election).  We do not like budget deficits, but we like giving companies with profits in the billions tax breaks.

The O&G “subsidies” .... they arent specific to the O&G industry right? I mean, any company can claim these same deductions and exemptions, right?

Thank you Propublica, once again, for being the DNC’s mouthpiece and not adding anything to the debate.

@Mike H:  No, most are specific to the O&G industry.  Don’t write this off as a Left vs. Right debate.  We need to be making smart cuts in our budget and cutting subsidies to oil companies makes a lot of sense.  They are highly profitable companies that routinely set record profits.  They would be doing the work they currently do without the incentives.  Without the need for an incentive, that money is simply being given away.  To rationalize that these corporations somehow need those tax incentives is unreal and frankly against conservative values.  Why can’t we all just admit that congress won’t eliminate them because they are getting too much money from the oil industry to let it happen.  That’s the real issue here.  Legislation to the highest bidder.

The way I read the NT Times article, these subsidies are specific to the oil and gas industry. Mike H doesn’t agree. Can someone with the proper expertise please comment?

Hi Mike H.,

For a look at some specific subsidies for oil and gas, I’d point you to the President’s fiscal year 2011 budget (pg 161 if you go by pg numbers, 165 of the actual PDF):

http://www.whitehouse.gov/sites/default/files/omb/budget/fy2011/assets/budget.pdf

Look under “oil and gas company preferences.”

You’re right that this post may not have added enough to the debate. I neglected to mention that industry also enjoys royalty waivers, another big cost-saver that Obama did not mention.

http://www.propublica.org/blog/item/oil-companies-still-get-billions-in-incentives-to-drill-in-deep-water

Best,
Marian

Adam, the question was entirely rhetorical. There are ZERO industry specific “subsidies” for the O&G industry. So once again, thank you Propublica for adding nothing to the debate except rehashing a BS talking point.

Investigative journalism at its finest indeed!

@Mike H: The Energy Policy Act of 2005 provided 2.8 billion in tax reductions for fossil fuel production and incentives for drilling in the Gulf of Mexico.  I think most people consider this a subsidy.  There are many more examples on the books.  I think you are adding nothing to the debate.

From Merriam-Webster:

a grant by a government to a private person or company to assist an enterprise deemed advantageous to the public

How exactly is a tax break or a reduction in royalties equal a subsidy? These are not cash payments to the companies performing the work, they are reductions in fees on activities performed.

And no, it aint an issue of semantics.

Northwestern is a top university, producing legions of today’s “best and brightest”. Did you study vocabulary there Miss Wang ... you do see that there is a fundamental difference between a “subsidy” and a “tax break”, don’t you?

Investigative journalism at its finest!

Mike H,

http://www.investopedia.com/terms/s/subsidy.asp

Thanks for reading. I will not respond again if you continue with the personal insults.

Mike H:

Your definition is too narrow. The legal definition is as follows:

“Subsidy: An economic benefit, direct or indirect, granted by a government to domestic producers of goods or services, often to strengthen their competitive position against foreign companies.”

source: Dept.of State

Tax breaks are indirect subsidies. They may also come in the form of increased tariffs on foreign producers of the same product.

So if I understand Mike H’s argument, if there are no cash payments to the O & G industry there are no subsidies. Fine . . . then we can call them tax breaks or reductions in royalties.

How does this move the argument forward? If we tell the industry, their lobbyists and Congress that their special O & G tax breaks and royalty reductions should be eliminated, will they now agree because we’ve eliminated the hated S word?

Kevin A. McDonald

Feb. 10, 2011, 7:07 p.m.

Truly hypocritical, socialism for oil companies and skimping on important enviromental protections.

The facts of the discussion don’t change because you don’t like the use of a particular word, Mr. H.

Thanks very much Pro Publica and Marian for pointing out a real problem with the logic of the GOP AND Obama budget proposals, and then paying attention and deftly (and politely) answering questions and pointing out the weakness in critical thinking skills on the part of some in the comments section. Well done.

This is part of a broader plan that has been going on for years. The deep-seated hatred on the right for assistance going to people less fortunate than themselves has them obsessed with toppling Social Security and Medicare. They know the only way to do this is to bankrupt the country, and they did a good job of it with their last administration.

Thank you Mike H. for once again proving the feeble-mindedness of the current right wing. Work on your argument and critical thinking skills, because we’d love to have an intelligent, thoughtful and well-informed right wing back in the debate someday.

Kevin A. McDonald

Feb. 10, 2011, 7:10 p.m.

Truly hypocritical, socialism for oil companies, skimping on important enviromental protects.

Gunther Steinberg

Feb. 10, 2011, 7:58 p.m.

In California, the Oil companies even object to paying a royalty to the state for draining the oil from the ground. We seem to be the only state that does not benefit from such fees. - If it means paying something OUT the companies object, but they do like the taxpayers subsidizing them with depletion allowances and other subsidies.

Michael Austin

Feb. 10, 2011, 8:43 p.m.

Thanks, Marian Wang, for the great reporting. What you’re doing is fabulous work, and around half of the American public hasn’t a clue how essential it is.

After many years of watching the outcome of situations like this, and straightforward readings of American history, I’d say it’s likely business in the United States won’t change, and we’ll continue our destructive practices for the most part.

By a majority, most of our countrymen believe the Earth was created around 6,000 years ago; it’s an outgrowth of this philosophy that sensible and simple scientific observations don’t appeal to them.

Mike H and others like him who post on Pro Publica are fossil fuel shills. They also exhibit misogynistic tendencies and they don’t understand what journalism is. The real deal is that American government is owned by corporations, be it bankers, fossil fuels or military-industrial. The GOP is the more owned of the two major parties, but the Dems aren’t much better. Until we do what the Egyptians are doing, we will continue to be sheep and lemmings in a society ruled by capitalist monsters.

Another example of Republican indulgence of unbridled capitalism!

If BP was leasing the Horizon rig, why shouldn’t BP be allowed to write off the ENTIRE lease cost? It is an expense, right? BP can’t get Transocean to just give them back all those lease payments, can they? Of course not! Because it is not a “subsidy”, nor is it a “tax break”. It is a legitimate EXPENSE. Any CPAs out there reading this want to weigh in? ANY business can LEASE a vehicle for any business purpose and deduct the entire lease payments from their earnings, because it is a cost of doing business. Oil companies want reduced royalties? So? So do the wind power companies. Wind companies negotiate the lowest royalties they can get away with. Makes perfect business sense. Wind power companies also negotiate ad valorem tax abatements before they build their windfarms.

Oil companies too rich? They are simply in the right place at the right time. Oil companies don’t make oil prices so high, governments (indirectly) do. Drilling moratoriums, over time, help limit oil supplies. Some US drilling moritoriums have been in place since the 70’s. Then there’s the Federal Reserve. Ben Bernanke has been flooding the market with paper US dollars (QE1 and QE2), causing investors, fearing inflation, to put their money in commodities like gold, wheat, and…oil!, making oil prices rise even more.

Remember that oil companies weren’t so rich back in the late ‘80s and ‘90s, after the Saudis opened the taps on their wells in ‘86, flooding the market with oil and driving prices below $10/bbl. Plus, back then the US dollar was far and away stronger than any other world currency (during the Reagan pro-business, pro-growth years..), helping to keep oil prices low. A stronger US dollar buys more oil. The Fed flooding the currency markets with dollars drives down the value of the dollar, and thereby drives up the price of oil. 

Remember 99 cent gasoline? Want lower oil prices today, and therefore keep more money in your pockets? Let the oil companies drill for and discover more oil to more than satisfy the demand. If you take away their legitimate tax deductions for the expenses involved in searching for and drilling for more oil, you will only make it harder and more costly to find oil, which will only make oil prices higher, driving up the cost of everything. Wanna ride a bicycle so you don’t burn gasoline and thereby help those evil oil companies? Surprise! Every piece of that bike used crude oil in its manufacture. Those plastic keys you’re tapping to write your angry messages here against the evil oil companies, those keys on your keyboard couldn’t have been made without oil. The clothes you wear, the food you eat, the very air-conditioned air you breathe comes thanks to oil. If you want to screw the oil companies by not letting them deduct their expenses, you will ultimately be screwing yourselves. Economics 101.

Hmmm …. “investopedia” … quality source to be sure, but you must not have looked too hard for a better one. 

The WTO has an internationally agreed upon definition for subsidy:

The definition contains three basic elements: (i) a financial contribution (ii) by a government or any public body within the territory of a Member (iii) which confers a benefit. All three of these elements must be satisfied in order for a subsidy to exist.

Seems pretty clear that tax and royalty breaks do not meet this qualification as there is no explicit contribution. Otherwise, any activity that was given preferential treatment in the tax code to any activity, from having additional dependents to being disable would be considered a subsidy, and clearly they aren’t. You might simply see this as me being a jerk over a semantic issue but it kind of cuts to the crux of the problem in my mind.

Additionally, it might have been nice if you informed your readers that these “budget cuts” are not cuts at all since the money has not been spent yet. These “cuts” apply to the proposed2011 fiscal budget and, as I am sure you are well aware, we are not in the 2011 fiscal year yet and the 2011 budget has not even been approved. Seems relevant to point that out, but I guess since I don’t have a high priced journalism degree from Medill, I must be mistaken.

The EPA and most regulatory agencies were handed sharp cuts in the early 1980’s and throughout the Reagan years.  Many of those programs have never recovered.  “Do more with less” was a poorly thought-out order, and the truth is that having less meant doing less even as the American public demanded more and more.  The companies that agencies are supposed to regulate have been getting bigger and bigger breaks - tax breaks and regulatory breaks - and making bigger and bigger profits.  But far down on the American totem poll, as just an average citizen, I do not see their profits benifitting me or doing anything to ease my utility bills/energy bills.

@Gary B.: Here’s your quote: “If you want to screw the oil companies by not letting them deduct their expenses, you will ultimately be screwing yourselves. Economics 101.”
There are many facts left out of your passionate defense of oil companies, oil use, taxpayer subsidies to the oil industry, and oil profits. And it is not easy to get a person like you to see the truth, especially when your way of life and obvious love of money depend on you not seeing it. But I will try to explain it to you very simply…The world is indeed addicted to oil and other fossil fuels. Without them, our lives would have to be much different. The sourcing and use of fossil fuels kills the planet we live on. The relentless expansion of drilling and fossil fuels use that you advocate are stealing the oxygen from our air, the blue from our skies and the life from our world. Oil companies are monopoly drug dealers, able to control most all of us, and profiting obscenely from it, while helping us poison ourselves. They are the same as tobacco companies or heroin dealers, only worse. If you want to see the true nature of the oil industry, watch the movie There Will Be Blood. Ultimately, humanity’s reliance on fossil fuels, along with our propensity to breed past carrying capacity, will be our downfall.

@Mike H.
A (financial) contribution, even in the “WTO sense”, does not strictly infer a cash payment.  It encompasses a broad scope of a benefit received which can be in the form of an impost or levy.  You need not look far for examples should you ever choose to back your arguments.  Here is a WTO tidbit from the ongoing Boeing/Airbus disputes that you can chew on “The trade referee found that much of the $22 billion benefit Boeing enjoyed from tax breaks and defence and research contracts was also an illegal subsidy”.  So even based on semantics, your argument is weak at best.

That being said, I completely agree with one analysis from your previous post.  You make a very compelling case for yourself, which I believe would be universally accepted even in the “WTO sense”, that you are a jerk.  Well said, I believe that is the crux of the issue.

You find Mike H’s logic demonstrated on playgrounds all over America.  “I didn’t throw the rock!  I didn’t!  I tossed it. His face ran in front of me!”  You find this pathological adherence to strict definitions being used by right wing opponents in every debate.  When their ideas are bankrupt and don’t hold up they fixate on semantics and percieved errors in definition as though it was a rational defense.

Paul, the WTO ruling refered specificly to “grants” and tax credits (not tax breaks) given to Boeing to perform research and. The report is right on the website.

Try again guys.

The GOP will not be happy until they defeat Obama. They want him out soooooo bad that they would destroy the country for it.

Katie, you hit the nail on the head.  The GOP’s first priority is not to do what is best for America, it’s to do what will put them back in power and keep them there.

@Mike H, a tax credit is basically the same thing as a tax break. The only difference is that a credit is a set amount and a deduction is usually a percentage of something. It’s financial aid to oil companies no matter how you try to frame it. Seems to me you conservatives aren’t really free market. It looks more like you give money to favored industries that contribute to campaigns and try to disadvantage other competing industries.

Mike H,

A number of us are against corporate welfare, by whatever term you want to nitpick in defining it.  The Supreme Court decision to allow corporations to use unlimited money to “bribe” (excuse me - contribute to) our elected representatives will ensure that corporate welfare becomes more lucrative while the GOP cuts programs that actually help “real” people. 

PS - Please let the Kochs know they aren’t paying you enough.

Another subsidy that the fossil fuels industry receives is free use of the public commons for disposal of waste, specifically CO2.  Of course, it does require a little bit of rethinking the concept of “subsidy” to see negative pollution externalities as subsidies, so I might get slapped down by some OED wielding wingnut on that.  But it makes sense to me in the sense that it’s something that belongs to the public that is being used for free and the costs shifted to the public.

Fascinating. We have a very intelligent dialogue concerning government generosity toward an industry or industries that contribute to (primarily) GOP candidates. One poster drives it off track by re-defining the word used to describe the largesse, and the dialogue takes a turn in that direction. Pretty much what happens in Washington every day. The subject is simple - the GOP, and half the Dems, are bought and paid for and the media is, in general, not very interested in addressing it.

So, I take that the Senators, as of last may, aiming to eliminate some portion of these subsidies and waivers, have so far failed to accomplish this.  Marian, is there a follow-up on the story at this link: http://bit.ly/etPjCw ?

This subject is extremely more complicated than stated in this article. Tax credits are given by nations all over the world in order to keep corporations of economic interest. It is done by every state. Examples can be as unusual as $365,000,000 given in Corn subsidies to farmers,while Cargill shows this amount in profits. All this is woven into the fabric of our government that it would take a lifetime to unravel.

Check out OpenSecrets.org to see how much money the democrats get vs republicans on the House Energy and Commerce Commitee. Clearly republican members get the Lions share from OIL AND GAS—what a surprise LOL.

Over 2 million dollars! Do you think that has anything to do with them wanting to gut the EPA?
You think?

I love how Mr. Fred Upton is against green energy subsidies yet is pro oil subsidies.  He is a walking contradiction, “let the market run on its own,” yeah right Mr. Upton then why don’t we let oil companies run on their own dime and close the loopholes they use.

Loopholes that not only the oil companies use, but others like in the cruise industry to register their property in other countries yet operate them in the US.

Gary B. Mike H are part of the oil company and Republican conspiracy to spread lying propaganda to the masses.
They are being paid to read the comments and remark on them.  If the remarks ar against the oil are Republican Party
doctorate they will attack the person who wrote the comment against their employer.  They should be ashamed of themselves
but being selfish rich psychopath’s they will just shrug it off at complete their jobs like Max Amann, Alfred Baeumler and Joseph Goebbels
the best way to stop them is to not read our remark on what they have say

Why do you think the Republican party wants to cut the Environmental Protection agency’s and eliminate it
eventually.  Do you know what the EPA does for you if not you should find out before you let the Republicans
have their way.  You hear them say that the EPA doesn’t do anything for the American people!.  What they should be saying is the EPA
doesn’t help big oil environmental polluters these are the Americans they want to help.  They say it cost to much each year
to run the Environmental Protection Agency while they are giving $4 billion a year to big oil.
read what the EPA does for you
http://www.environmentallawyers.com/regulations/how-epa-protects-us.htm

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