Friday, October 29, 2021

Biden bill targets fossil fuel firms in hopes of raising more than $100 billion in taxes

 

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The tax-and-spending bill the White House hopes to pass within a matter of days would provide unprecedented levels of funding to combat climate change. But it would force the oil and gas industry to share the cost by raising more than $100 billion from fossil fuel firms over the next decade.

The BP Whiting Refinery in Indiana.© Luke Sharrett/Bloomberg The BP Whiting Refinery in Indiana.

The revenue would come primarily from closing one tax loophole regarding overseas income and reinstating an Environmental Protection Agency Superfund cleanup tax on oil that lapsed in the 1990s.

“I wish Congress had gone further,” said Thornton Matheson, a senior fellow at the Urban-Brookings Tax Policy Center, explaining that the deal leaves in place about $3 billion per year in other subsidies and supports for fossil fuel. But, she said, the new revenue streams “are a step in the right direction.”

The reconciliation bill’s extension of the production tax credit also holds out the potential of extending the lifetimes of several of the nation’s nuclear power stations considering shutdowns. And both versions of the legislation include controversial methane taxes designed to prod companies to reduce the potent greenhouse gas released by leaks in natural gas infrastructure.

The American Petroleum Institute called the new fees “duplicative” and “punitive.”

The new provisions reflect the administration’s broader effort to incorporate the economic impact of burning fossil fuels into federal decision-making. On Friday, the Interior Department’s Bureau of Land Management said its environmental assessments of new oil and gas leases will analyze their greenhouse gas emissions on a national scale and consider the social cost of these climate impacts.

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The burning of fossil fuels — such as coal, oil and gas — is a primarily source of carbon dioxide emissions and contributor to global warming. This week, House lawmakers spent six hours grilling top leaders of ExxonMobil, BP, Chevron and Shell Oil on their alleged role in misleading the public on climate change.

But while Congress chastised the executives, governments around the world are providing the industry with hundreds of billions of dollars in subsidies annually. Between 2015 and 2019, the top 20 economies in the world provided $3.3 trillion of direct support of coal, oil and gas, a report by BloombergNEF found.

In the United States, the tax code includes more than a dozen incentives for the fossil fuel industry — some of which have been in place for more than a century. As a presidential candidate, Joe Biden pushed back against those measures. “I’d stop giving to the oil industry,” he said in his final debate against former President Donald Trump. “I’d stop giving them federal subsidies.”

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As president, Biden has made climate change a cornerstone of his domestic and international agenda. This weekend, he flies to Glasgow, Scotland, for the COP26 global climate summit.

In June, the Biden administration submitted a budget proposal that would have eliminated many fossil fuel subsidies. That wish list of changes dwindled in subsequent months, but the latest Build Back Better proposal includes two changes that will bring in significant revenue from oil and gas companies.

One change would eliminate an oil and gas exception to a 2017 law that taxes foreign profits of U.S. companies. According to the White House’s calculations, the adjustment would bring in as much as $84.7 billion over 10 years, depending on the corporate tax rate.

The reconciliation proposal would also reinstate the tax on crude oil that was designed to support environmental cleanup efforts under the EPA’s Superfund program but which expired in 1995. The proposal would generate an estimated $38 billion over 10 years.

“These are two really big revenue raisers,” said Sujatha Bergen, health campaigns director at the nonprofit Natural Resources Defense Council.

Another significant source of revenue could be the proposed methane fee, which Senate moderates earlier said was dead but has reappeared in both the House and Senate versions of the bill. The House bill would phase in payments for methane emissions above a certain threshold, starting at $900 a ton in 2023 and ramping up to $1,500 in 2025.

But the methane provision also has the potential to topple the entire budget framework. Lobbyists working against the measure noted that any vote in support of it would provoke TV ads this winter when natural gas prices are expected to jump to unusually high levels thanks to disruptions in the European market. A delay in implementation might protect lawmakers, however.

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