LA refinery 2020

An aerial view shows Marathon Petroleum Corporation's Los Angeles Refinery, California's largest producer of gasoline, on April 22, 2020. (Photo: David McNew/Getty Images)

'Failure of Climate Leadership': House Dems' Tax Plan Leaves Oil Subsidies in Place

"Omitting provisions to end fossil fuel subsidies—some of which have been in place for over 100 years—is inexcusable."

Climate campaigners took House Democrats to task on Monday for releasing a tax plan that would keep in place billions of dollars in subsidies to the fossil fuel industry, a decision that one advocacy group called an "egregious dereliction of duty" amid the worsening planetary crisis.

While the proposal (pdf) unveiled by the powerful House Ways and Means Committee would close one tax loophole for international oil and gas extraction, the advocacy group Friends of the Earth pointed out in a statement that the plan would leave untouched a number of domestic fossil fuel subsidies currently embedded in the U.S. tax code, including:

  • A subsidy enacted in 1916 (Sections 263(c) and 291) allowing many fossil fuel producers to deduct 100% of many costs associated with extraction;
  • A subsidy enacted in 1926 (Sections 611 through 613A and 291) that allows many producers to deduct 15% of gross income annually, which often results in a deduction greater than the value of actual assets; and
  • A tax credit for "carbon capture and sequestration" (Section 45Q), an unrealized, faulty technological process that is falsely characterized by the industry as a solution to toxic climate emissions.

"This is a failure of climate leadership that will not soon be forgotten," said Friends of the Earth president Erich Pica, who called on House Ways and Means Committee chair Rep. Richard Neal (D-Mass.) and House Speaker Nancy Pelosi (D-Calif.) to immediately amend the proposal.

Mitch Jones, policy director of Food & Water Watch, offered a similar assessment of House Democrats' plan, arguing that "we must be halting new oil and gas drilling and fracking, not encouraging decades more of it."

"The disappearance of subsidy removal in the draft bill is an egregious example of fossil fuel lobbyists meddling with our democracy."
--Collin Rees, Oil Change International

"This abject failure to stand against polluting fossil fuels and stand up for a livable planet now leads to a firm demand to the Senate and the Biden administration: No handouts for fossil fuels can be allowed," said Jones. "Not one dollar will be tolerated."

The House Ways and Means Committee's tax proposal is designed to help fund green energy investments, healthcare expansions, and other policy priorities that Democrats hope to include in their sprawling budget reconciliation package--a centerpiece of the party's and President Joe Biden's domestic agenda.

In April, Biden released a tax proposal that called for the elimination of around $35 billion worth of fossil fuel subsidies over the next decade. The Treasury Department said in a report (pdf) outlining the president's plan that the "main impact" of the repeal of such subsidies "would be on oil and gas company profits"--which may help explain the fossil fuel industry's ongoing lobbying blitz in support of its preferential tax treatment.

On Monday, in a statement that did not mention fossil fuel subsidies, White House spokesperson Andrew Bates praised the Ways and Means Committee's new proposal as "significant progress."

The Senate Finance Committee, headed by Sen. Ron Wyden (D-Ore.), is currently crafting a tax proposal that's expected to differ significantly from the House plan. For the reconciliation package to become law, the House and Senate must ultimately approve identical legislation--a difficult task given Democrats' narrow margins in both chambers.

It's not precisely clear why the House Ways and Means Committee opted not to tackle fossil fuel subsidies, a move supported by a majority of the U.S. public and many--though not all--Democratic lawmakers. Late last month, a group of more than 50 House Democrats penned a letter urging their party's leadership to prioritize the elimination of fossil fuel subsidies in the emerging reconciliation package.

"We support a deal that sufficiently enhances climate justice, especially in repealing fossil fuel subsidies. Congress must follow through in implementing the president's vision," the lawmakers wrote. "The United Nations Intergovernmental Panel on Climate Change (IPCC) has stated clearly that the world has less than a decade left to make significant reductions in carbon pollution emissions."

Collin Rees, U.S. campaigns manager at Oil Change International, said in a statement Monday that the reconciliation bill "represents our best chance in decades to end billions in deadly public giveaways to fossil fuel corporations."

"Omitting provisions to end fossil fuel subsidies--some of which have been in place for over 100 years--is inexcusable," said Rees. "The disappearance of subsidy removal in the draft bill is an egregious example of fossil fuel lobbyists meddling with our democracy. While millions suffer from climate impacts, our legislation is too often written to benefit a handful of special interests."

"We urge representatives to legislate for our future," Rees added, "not for the profits of Big Oil and Gas executives."

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