News Center

June 2nd, 2011

Iowa Renewable Fuels: Oil Does Get Special Tax Treatment

The Iowa Renewable Fuels Association (IRFA) today called upon the Iowa Energy Forum to correct inaccurate and misleading statements from its sponsor at a recent roundtable in Des Moines, Iowa.  During the event, American Petroleum Institute chief economist John Felmy inaccurately stated that oil companies do not receive “special” subsidies, but rather “get tax treatment that is similar to every other industry.”

“To claim that the oil industry receives no special subsidies, just standard business tax treatment, is simply ridiculous,” stated IRFA Executive Director Monte Shaw.  “Mr. Felmy is the oil industry’s chief economist, he knows better.  For example, who but an oil company receives the marginal oil well subsidy or gets to expense intangible drilling costs?  The oil industry hasn’t minded getting singled out for special tax breaks since the inception of the Tax Code.”

Just a partial list of the billions of dollars of subsidies unique to the oil industry includes:

Percentage depletion allowance
Marginal oil well incentives
Enhanced oil recovery credits
Intangible Drilling Costs expensing
Deduction for tertiary injectants
Exception from passive loss limitations for oil and gas
Oil and gas excess percentage over cost depletion

Shaw continued:  “For one hundred years the oil industry has used public policy to tilt the energy playing field in its favor and today is no different.  There are numerous oil specific federal tax provisions and many more that apply to oil companies.  It is time for the oil industry to come clean and to stop trying to fool Iowans.  Oil tax breaks must be evaluated as part of a comprehensive review of the U.S. energy policy.”

Iowa is the leader in renewable fuels production.  Iowa has 41 ethanol refineries capable of producing nearly 3.7 billion gallons annually. In addition, Iowa has 14 biodiesel facilities with the capacity to produce 315 million gallons annually.

The Iowa Renewable Fuels Association was formed in 2002 to represent the state’s liquid renewable fuels industry. The trade group fosters the development and growth of the renewable fuels industry in Iowa through education, promotion, legislation and infrastructure development.

Notable Quotables

Todd Neely, DTN:  “The oil industry receives substantial amounts of taxpayer support — by some definitions significantly more than ethanol — a months-long DTN investigation concludes.

Looking at state and federal tax and other incentives available exclusively to the oil industry, DTN’s tally comes to $17.9 billion annually.”

http://www.dtn.com/ag/indepth/oil.cfm

American Petroleum Institute:  “Taxpayers have had the option to expense IDC [intangible drilling costs] since the inception of the Tax Code.

http://www.api.org/policy/tax/apikeytaxissues/index.cfm

Western Capital Energy Development:  “The immediate deduction of the intangible drilling costs or IDCs is very significant, and by taking this up front deduction, the risk capital is effectively subsidized by the government by reducing the participant’s federal, and possibly state income tax.”

http://www.oilandgasjointventures.com/tax-benefits.html

Mark Cussen, Investopedia:  “No other investment category in America can compete with the smorgasbord of tax breaks that are available to the oil and gas industry.”

http://www.investopedia.com/articles/07/oil-tax-break.asp#13068728219222&close

U.S. Senator Robert Menendez:  “At a time when families are feeling the pain at the pump and our deficit keeps growing at an alarming rate, we simply can’t afford to keep giving away billions in taxpayer handouts to oil companies that are doing nothing to help lower prices.”

Former Alaska Governor Sarah Palin:  “I think that all of our energy subsidies need to be relooked at today and eliminated.  And we need to make sure that we’re investing and allowing our businesses to invest in reliable energy products right now that aren’t going to necessitate subsidies because, bottom line, we can’t afford it.”

Enhanced by Zemanta

About the Author

The Iowa Republican





blog comments powered by Disqus