Supercommittee members face pressure over energy subsidies

The Congressional deficit reduction “supercommittee” that has been charged with finding $1.5 trillion in budget savings by Thanksgiving could save billions by eliminating tax breaks and subsidies for oil and gas companies, which advocacy groups from across the ideological spectrum support, but energy companies are battling to keep their good deals.

In an online campaign launched last week, Taxpayers for Common Sense urged voters to lobby supercommittee members against giving subsidies to energy companies.

According to the group’s Subsidy Gusher analysis, oil and gas companies are expected to get $78 billion in subsidies over the next five years.

Oil companies are resilient, the group argues, and made record profits even during the recent recesssion and despite major environmental disasters like the BP Gulf oil spill. They don’t need special suppot.

Taxpayers for Common Sense spokesman Mike Serresco said that his group, along with Friends of the Earth, Public Citizen and even the Heartland Institute, a libertarian organization that denies climate change, are pushing cuts to energy company entitlements.

“If we had our way we would cut all energy subsidies,” he said. “Solyndra is a good example. The government is just a bad venture capitalist. You should let the private market do that kind of financing. In the case of oil and gas, which gets by far more in subsidies than renewables, those subsidies are just bolstering profits. They are put in place a century ago for reasons that are no longer valid.”

The Intangible Drilling Costs tax credit, for example, established in 1918, allows oil companies to deduct most of the expenses of drilling. With oil prices near $116 a barrel, it’s hard to argue that ending this deduction with impede exploration, yet this benefit is expected to cost $8.9 billion over the next five years.

Some of the other tax benefits designed for energy companies include:

Ultra-deepwater and Unconventional Natural Gas and other Petroleum Resources R&D
Cut: $190 million

Expensing of Exploration and Development Costs
Cut: $270 million

Percentage Depletion Allowance (Gas & Oil) (Excess of percentage of cost depletion)
Cut: $10.8 billion

Percentage Depletion Allowance (Coal)
Cut: $1.3 billion

Capital Gains Treatment for Royalties on Coal
Cut: $630 million

Domestic Manufacturing Deduction for Hard Mineral Fossil Fuels
Cut: $2.3 billion

Manufacturing Tax Deduction for Oil and Gas Companies (IRC Sec 199)
Cut: $15.9 billion

Geological and Geophysical Amortization
Cut: $1 million

Because these benefits are part of the tax code, any attempt to change them risks devolving into a politically difficult ideological battle over raising taxes, and the groups that are arguing to end these breaks must compete with the energy lobbyists that are defending them.

Exxon Mobil — the biggest U.S. oil company — has spent more than $10 million lobbying Congress so far this year, according to the Center for Responsive Politics.

Though energy companies have vastly more money to devote to framing the discussion on their tax breaks, they have been forced into a defensive position.

The oil lobby has ramped up television ads in the home districts of supercommittee members in which they frame ending their tax breaks as the creation of “job-crushing new energy taxes.”

In an interview on CNN on Sunday, American Petroleum Institute lobbyist Marty Durbin even claimed that oil companies don’t get any special treatment.

“There are no loopholes,” he said when asked to justify billions in tax breaks for oil companies that are showing record profits. “These are basic tax deductions that every industry is allowed to use.”