Another missed opportunity to improve U.S. energy security
On Thursday, Senate Democrats fell short of the eight votes needed to curtail billions in tax breaks benefiting the five largest oil and gas companies operating in the United States.
“With high deficits and debt, we have to make tough choices, but it isn’t a tough decision to end taxpayer subsidies for oil and gas companies making $35 billion in the first quarter alone,” said Sen. Max Baucus (D-MT), chairman of the Senate Committee on Finance. “These tax breaks represent less than two percent of what these companies are on track to make this year, so it’s clear they aren’t needed to ensure profitability and they haven’t kept gas prices down.”
The bill received 52 votes for and 48 votes against but failed to reach the required 60 votes to pass. Sen. Olympia Snowe (R-ME) and Sen. Susan Collins (R-ME) voted with the Democrats to approve the measure, whereas Sen. Ben Nelson (D-NE) and Sen. Mark Begich (D-AK) joined the Republicans to vote against the bill.
The failure to pass S. 940 was a missed opportunity to restructure the tax code to save billions for the government, redirect more tax incentives and funding to develop and scale sustainable renewable energy, and improve the nation’s long-term energy security.
America remains at the mercy of the big oil and gas corporations that prioritize quarterly profits over the doing what is right. This is the worst position to put taxpayers considering the following realities:
FACT: Crude oil is a finite non-renewable resource.
Worldwide supply of crude oil will become increasingly scarce due to rising global demand for petroleum products. Eventually, it will become more difficult and more costly to extract crude oil. Prices at the pump will continue to rise regardless of whether the oil companies receive tax breaks or not. The question that S.940 posed to lawmakers is this: Should American taxpayers continue to subsidize a 150-year-old industry at the expense of their long-term economic and environmental well-being or should Americans invest their tax dollars in research, development and production of scalable renewable energy to ease the transition to cleaner energy? Imagine how much can be achieved if the $40 billion in oil and gas tax breaks were instead invested in developing affordable alternative energy during the next 10 years?
FACT: The rate the United States consume oil is unsustainable.
The United States consumes 25% of the oil produced globally but holds only 2% of the world’s oil in its oil reserves. “A much better solution lies in permitting our industry to increase energy supplies, including supplies found here in North America such as oil and natural gas found off our shores and in our shale formations,” argued Rex Tillerson, CEO of Exxon Mobil, during his testimony before the Senate Finance Committee. The Big Oil executives’ repeated demands for increased domestic drilling and oil production are akin to placing a small bandage to treat a gushing bullet wound to the gut when surgery is needed to fix the problem.
FACT: American oil corporations are legally required to pursue profits for their shareholders.
In the first quarter of 2011, the five major oil companies reported billions in profits: Chevron with $6.2 billion, Shell with $6.9 billion, BP America with $5.48 billion, ConocoPhillips with $3.028 billion, and Exxon Mobil with $10.65 billion. According to S. 940, “the major oil companies have accumulated more than $1 trillion in net profits over the last 10 years and collected more than $40 billion in tax breaks during the same period, but have invested negligible amounts of those funds into research and development of the production of clean and renewable fuels made in the United States, leaving consumers with few if any choices at the pump.”
This statement is supported by BP America’s President Lamar McKay’s testimony in which he bragged about investing just nearly 10% of its capital budget in alternative energy that spans from wind, cellulosic biofuel, and solar. A 10% investment spread across three forms of alternative energy sounds great for greenwashing commercials and PR, but it is a pathetically small amount compared to the 90% capital budget devoted to producing existing oil and natural gas resources.
The unwillingness of oil and gas industry to invest substantial resources in developing alternative energy is underscored by Chevron CEO John Watson’s statement before Congress: “The surest way to address a challenge of this magnitude is to focus on what we can control, using what we know to safeguard against what we don’t.” Their business decisions are driven by corporate profits and not long-term investment in alternative energy since it’ll take time and significant amounts of money to make clean energy affordable for consumer and profitable for corporations. So it’s in the interest of oil and gas executives to maintain the status quo through political fear-mongering. They claim that taking away oil and gas tax credits would amount to a tax hike that will raise gas prices, kill jobs, reduce investments in alternative energy, and hurt America’s global competitiveness. Unfortunately, the politicians on Capitol Hill – keenly aware of the 2012 elections – caved to Big Oil’s political threats. This missed opportunity means the American taxpayers will end up paying an even higher price for energy in the future.
- Senate.gov: Roll call vote on S. 940 Close Big Oil Tax Loophole Act
- Library of Congress: Bill text of S. 940 Close Big Oil Tax Loophole Act
- Library of Congress: Bill summary & status for S. 940 Close Big Oil Tax Loophole Act
- CSPAN.org: Lawmakers address high gas prices
- BenNelson.Senate.Gov: Politics as usual won’t lower prices at the pump
- Begich.Senate.Gov: Begich statement on vote against ending incentives for energy companies
- Finance.Senate.Gov: Baucus statement regarding oil and gas tax breaks
- WhatTheFolly.com: Transcript of Exxon Mobil CEO Rex Tillerson’s testimony before the Senate Finance Committee on May 14, 2011
- WhatTheFolly.com: Transcript of ConocoPhillips CEO James Mulva’s testimony before the Senate Finance Committee on May 14, 2011
- WhatTheFolly.com: Transcript of BP America President Lamar McKay’s testimony before the Senate Finance Committee on May 14, 2011
- WhatTheFolly.com: Transcript of Shell President Marvin Odum’s testimony before the Senate Finance Committee on May 14, 2011
- WhatTheFolly.com: Transcript of Chevron CEO John Watson’s testimony before the Senate Finance Committee on May 14, 2011
- WhatTheFolly.com: Breaking America’s dependence on foreign oil