House Hearing Scrutinizes Billions of Dollars in Fossil Fuel Subsidies. Invited Oil Execs are a No-Show.

The oil industry receives billions in subsidies even as it cuts jobs and rewards shareholders. But Congress is considering stripping them as part of the infrastructure bill.
House Hearing Scrutinizes Billions of Dollars in Fossil Fuel Subsidies. Invited Oil Execs are a No-Show.
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Gas Flare. Credit: aka CJ (CC0 1.0)

On May 19, the U.S. House Natural Resources Subcommittee on Oversight and Investigations held a hearing scrutinizing wasteful fossil fuel subsidies. Rep. Katie Porter (D-CA), who chairs the subcommittee, invited the CEOs of Devon Energy, EOG Resources, and ExxonMobil, as well as executives from the energy industry lobby group Western Energy Alliance. None accepted the invitation to appear before the committee. 

“Devon Energy is a Fortune 500 company, and the biggest oil producer on federal land in the Lower 48 states. That should have been reason enough for Devon to be here today, answering questions with significant implications for our public lands and natural resources,” Rep. Porter said in her opening statement. “Like all oil companies, Devon gets special tax breaks intended to encourage fossil fuel production.” 

But the oil industry did not show up to the House hearing to make its case. Instead, they left that to Alex Epstein, the director of the Center for Industrial Progress (CIP), a for-profit think tank that advocates for using more fossil fuels. 

In his testimony, Epstein said the oil industry was being punished. The “U.S. government is actually harming America and the world by giving unjust punishments to the incredibly life-giving oil and gas industry,” he said. “We don’t have a moral obligation to shrink this industry, we have an obligation to liberate and expand it.” 

Epstein’s CIP regularly promotes oil, gas, and coal and has received funding from the coal industry. Among the many of misleading claims made during his testimony, Epstein asserted that transitioning to green jobs would be immoral and a “nightmare” that would result in mass poverty. In contrast, a wide range of experts say that the clean energy transition will create millions of new jobs, and that the cost of inaction on climate change would be far more expensive

The other witnesses at the hearing spoke to the enormous subsidies and loopholes enjoyed by the oil and gas industry. “Congress should be ensuring that extractive industries pay their fair share for resources extracted from public lands. Unfortunately, for far too long this has not been happening,” said Tim Stretton, a policy analyst at the Project on Government Oversight.

One consistent talking point from the oil industry and its lobbyists, such as the American Petroleum Institute (API), which was not present at the hearing, is that their industry benefits from the same tax benefits as any other company.  

“The fossil fuel industry is fond of saying that they don’t receive any special considerations, especially in the tax code. And that’s simply not true. There are dozens of special tax loopholes that save the oil and gas industry billions every year,” Sujatha Bergen, director of health campaigns at the Natural Resources Defense Council (NRDC), told DeSmog. 

According to the Environmental and Energy Study Institute, the fossil fuel industry received $20 billion in direct subsidies in 2019, 80 percent of which went to oil and gas. For instance, there is “intangible drilling costs reduction,” which allows companies to deduct from their taxes a majority of costs incurred from drilling new wells. Drillers also enjoy the “percentage depletion,” which allows them to deduct 15 percent of the revenue generated from wells, another significant benefit. Together, these items equate to billions of dollars in tax benefits annually. 

Oil drilling. Credit: Imahornfan (CC BY-NC-ND 2.0)

Fossil fuel corporations also benefited immensely from the federal stimulus bills in the wake of the pandemic, receiving between $10 and $15 billion. The Trump administration also pushed through dozens of deregulatory measures under the cover of the economic crisis last year. 

Even after receiving the windfall, many oil companies turned around and boosted payouts to shareholders. Oklahoma-based Devon Energy, for example, took in $220 million from a change to a tax loophole tucked into Covid-19 relief efforts in 2020, and months later it paid a “special dividend” of $100 million to shareholders, according to BailoutWatch, a nonprofit watchdog.

BailoutWatch found that of the 15 companies that received more than $100 million as a result of the change in the tax code under the CARES Act, more than half increased dividends to shareholders, and all but two actually eliminated jobs. 

That undercuts another talking point from the industry: that scrapping subsidies would lead to job losses. In reality, the industry received billions of dollars in subsidies, rewarded shareholders, and ultimately eliminated jobs anyway.

In fact, the pay gap between oil executives and workers widened last year. Oilfield services company Baker Hughes, for example, received a $177 million windfall from the federal stimulus, while eliminating 13,000 jobs. The CEO was paid $15.3 million in 2020, which was 235 times larger than the average worker at his company, according to BailoutWatch. That ratio is up from 2019, when the CEO was paid 188 times more than his average worker.

Devon Energy, Baker Hughes, and the American Petroleum Institute did not respond to requests for comment. 

Looking forward, even without transformational climate policy that leads to drastic reductions in greenhouse gas emissions, the oil industry is heading for more job losses. An analysis from energy data firm Rystad Energy estimates that 20 percent of jobs in drilling, operational support, and maintenance could vanish in the next decade due to automation. That could mean the loss of 140,000 jobs in oil and gas in the U.S. alone. 

But most importantly, the climate clock is ticking. On May 18, the International Energy Agency said that to achieve net-zero emissions by mid-century, as many countries aim to do, new oil and gas projects need to cease immediately. A small part of that effort requires phasing out fossil fuel subsidies. 

“Cutting the subsidies in the tax code are a no brainer and a first small step towards tackling all of the ways we make it cheaper than it should be to operate fossil fuel companies,” Sujatha Bergen of NRDC said. 

Several members of Congress have proposed bills that would eliminate fossil fuel subsidies, and the massive infrastructure bill currently being negotiated in Congress, Bergen said, is the “best opportunity we’ve seen in years to finally cut the wasteful fossil fuel subsidies.” 

House Hearing Scrutinizes Billions of Dollars in Fossil Fuel Subsidies. Invited Oil Execs are a No-Show.
Nick Cunningham is an independent journalist covering the oil and gas industry, climate change and international politics. He has been featured in Oilprice.com, The Fuse, YaleE360 and NACLA.

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