Taxpayer Subsidies for Fossil Fuels on a Warming Planet in One Word: 'Absurd'

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Taxpayer Subsidies for Fossil Fuels on a Warming Planet in One Word: 'Absurd'

New investigation shows troubling correlation between campaign giving and approval of publicly-funded oil and gas projects

"At a time when scientists tell us we need to reduce carbon pollution to prevent catastrophic climate change," says Sen. Bernie Sanders, "it is absurd to provide massive taxpayer subsidies that pad fossil-fuel companies’ already enormous profits." (Photo: AP file)

A new investigation by the Guardian, highlighting the large campaign contributions given by fossil fuel corporations to lawmakers who then back public subsidies for those same companies, has led presidential candidate Sen. Bernie Sanders (I-Vt.) to describe the arrangement—especially in light of the dangers posed by runaway climate change—with one word: absurd.

In their examination of three specific fossil fuel projects run by Shell, ExxonMobil, and Marathon Petroleum—all of which received public funding—the Guardian reveals that, in each case, "the subsidies were all granted by politicians who received significant campaign contributions from the fossil fuel industry."

According to the Guardian, the investigation found:

  • A proposed Shell petrochemical refinery in Pennsylvania is in line for $1.6bn (£1bn) in state subsidy, according to a deal struck in 2012 when the company made an annual profit of $26.8bn.
  • ExxonMobil’s upgrades to its Baton Rouge refinery in Louisiana are benefiting from $119m of state subsidy, with the support starting in 2011, when the company made a $41bn profit.
  • A jobs subsidy scheme worth $78m to Marathon Petroleum in Ohio began in 2011, when the company made $2.4bn in profit.

Though oil and gas companies receiving such public largess is nothing new, proponents of climate action say that—at a time when fossil fuel companies should be forced to strand available assets in the ground in order to curb the worst impacts of climate change—the fact that such subsidies continue for some of the most profitable companies on Earth has become particularly problematic.

"At a time when scientists tell us we need to reduce carbon pollution to prevent catastrophic climate change, it is absurd to provide massive taxpayer subsidies that pad fossil-fuel companies’ already enormous profits," Sen. Sanders, who announced on April 30 he is running for president, told the Guardian.

The scientific evidence continues to be overwhelming and the warnings from experts about the impacts of climate change are only becoming more and more dire. To cite just two examples over the last twenty-four hour period, one major study has found that climate change may drastically impact the annual yields of the world's wheat harvest while another study revealed how the rate of sea level rise has increased steadily over the last two decades.

Using public data made available on a "subsidy tracker tool" created by the group Good Jobs First, which monitors federal subsidies, the Guardian investigation highlighted what it considered some of the most highly subsidized fossil fuel projects across the United States. What it found— in Pennsylvania, Louisiana, and Ohio—was a pattern of public support by key legislators who benefited financially from fossil fuel industry campaign support.

The Guardian reports:

  • Shell’s proposed $4bn plant in Pennsylvania is set to benefit from tax credits of $66m a year for 25 years. Shell has bought the site and has 10 supply contracts in place lasting up to 20 years, including from fracking companies extracting shale gas in the Marcellus shale field. The deal was struck by the then Republican governor, Tom Corbett, who received over $1m in campaign donations from the oil and gas industry. According to Guardian analysis of data compiled by Common Cause Pennsylvania, Shell have spent $1.2m on lobbying in Pennsylvania since 2011.
  • ExxonMobil’s Baton Rouge refinery is the second-largest in the US. Since 2011, it has been benefitting from exemptions from industrial taxes, worth $118.9m over 10 years, according to the Good Jobs First database. The Republican governor of Louisiana, Bobby Jindal has expressed his pride in attracting investment from ExxonMobil. In state election campaigns between 2003 and 2013, he received 231 contributions from oil and gas companies and executives totalling $1,019,777, according to a list compiled by environmental groups.
  • In Ohio, Marathon Petroleum is benefitting from a 15-year tax credit for retaining 1,650 jobs and a 10-year tax credit for creating 100 new jobs. The subsidy is worth $78.5m, according to the Good Jobs First database. “I think Marathon always wanted to be here,” Republican governor John Kasich said in 2011. “All we’re doing is helping them.” In 2011, Kasich was named as the top recipient of oil and gas donations in Ohio, having received $213, 519. The same year Kasich appointed Marathon Petroleum’s CEO to the board of Jobs Ohio, a semi-private group “in charge of the economic growth in the state of Ohio”.

Last month, along with Rep. Keith Ellison (D-Minn.), Sanders introduced a bicameral bill in Congress that would effectively put an end to large-scale subsidies for the fossil fuel industry. Called the End Polluter Welfare Act, the measure would end tax breaks for fossil-fuel industries, recoup taxpayer-owed royalties for fossil-fuel related practices on public lands and waters, and prioritize federally-supported research for clean energy projects. Further, the measures would also prevent companies from escaping liability for spills or deducting clean-up costs from their taxes.

Leaders from top environmental groups who spoke to the Guardian about subsidies, and the role that industry money plays in the U.S. political arena, all agreed that putting an end to taxpayer support for fossil fuel development is a no-brainer in terms of taking action on climate.

"Subsidies to fossil fuel companies are completely inappropriate in this day and age," said Stephen Kretzmann, executive director of Oil Change International.  "Climate science is clear that the vast majority of existing reserves will have to stay in the ground," Kretzmann said. "Yet our government spends many tens of billions of our tax dollars–every year–making it more profitable for the fossil fuel industry to produce more."

And Ben Schreiber, at Friends of the Earth U.S., added: "There is a vibrant discussion about the best way to keep fossil fuels in the ground–from carbon taxation to divestment–but ending state and federal corporate welfare for polluters is one of the easiest places to start."

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