In 2012, Senator Bob Menendez of New Jersey introduced a bill called the Repeal Big Oil Tax Subsidies Act. Its explicit goal: “to eliminate unnecessary tax subsidies and promote renewable energy and energy conservation.” President Obama was on board, and raised some eye-popping numbers in his argument for its passage (emphasis added):
“Last year the three biggest U.S. oil companies took home more than $80 billion in profits. Exxon pocketed nearly $4.7 million every hour. And when the price of oil goes up, prices at the pump go up, and so do these companies’ profits,” he said, adding, “In fact, one analysis shows that every time gas goes up by a penny, these companies usually pocket another $200 million in quarterly profits.”
The bill would have ended $2.4 billion dollars in tax breaks that go the five biggest oil companies every year. In a time of fiscal emergency, Menendez reasoned that eliminating government subsidies for some of the most profitable corporations in the world was a perfect opportunity to save the taxpayers some money. The President supported it. It cleared committee.
Then, it hit the Senate floor. Just as quickly as it had risen through the first steps of legislation, it became impossible to pass. A staunchly opposed group of Senators would not budge. The reforms died, and the oil subsidies lived on.
During the infamous “fiscal cliff” fight of 2013, five bills aimed at reducing giveaways to the oil industry were introduced to Congress. All five suffered the same quiet death as the Repeal Big Oil Tax Subsidies Act. No matter how dire the economic situation got, Congress refused to pull the plug on oil subsidies.
As it turns out, this story is not a new one. Our country has forged a rich tradition of tossing handouts to the oil industry. As Mother Jones found in a recent investigation:
Over the past century, the federal government has pumped more than $470 billion into the oil and gas industry in the form of generous, never-expiring tax breaks. Once intended to jump-start struggling domestic drillers, these incentives have become a tidy bonus for some of the world’s most profitable companies.
This tradition began at the turn of the 20th century as a way to prop up an emerging industry. At the time, drilling was a highly volatile endeavor, and government tax breaks helped mitigate some risk and get entrepreneurs off the ground.
Many of the oil subsidies that exist today are remnants of this era. The ‘intangible drilling costs’ and ‘depletion allowance’ writeoffs were passed in 1916 and 1926, respectively. Both problems these tax breaks were originally created to address were solved by technology years ago, but they continue to cost taxpayers between $1.3 billion and $4.6 billion each year.
Taxpayers currently subsidize the oil industry by as much as $4.8 billion a year, with about half of that going to the big five oil companies — ExxonMobil, Shell, Chevron, BP, and ConocoPhillips — which get an average tax break of $3.34 on every barrel of domestic crude they produce.
In 2012, Senator Menendez joined the ranks of a legion of politicians who have tried to reform this system over the years. Yet despite this history of opposition of oil subsidies, reformers have gained virtually no ground. Attempting to explain this strange contradiction, Andy Kroll points to the institutionalized influence of the oil industry:
Oil and gas companies and their employees have pumped more than $357 million into federal candidates’ campaigns since 1990… And that’s nothing compared to what they’ve spent on lobbying: more than $1.4 billion in the past 15 years. Last year, the industry employed 796 lobbyists, nearly 60 percent of them ex-members of Congress and staffers who’d come through the revolving door from Capitol Hill.
The oil industry uses its political connections to ensure that many lawmakers will take their side. This isn’t the old-fashioned corruption of days gone by, where Mr. Big Oil hands Senator Corrupt an envelope full of cash on the day she votes against the Repeal Big Oil Tax Subsidies Act. No, this is the type of power that can only be achieved through years of sustained political giving.
The billions of dollars from the industry aren’t necessarily aimed at one specific piece of legislation. Rather, they accomplish something much more valuable: They create a feeling of debt to the oil industry among lawmakers. In some cases, Congressmen surely feel dependent. If they suddenly find themselves in a competitive race, they want to be able to rely on that campaign check from ExxonMobil or Chevron. Anything that they know will anger their donors is sure to raise a red flag. Thus, oil subsidies remain untouchable.
Behind the feeling of debt to the industry lurks an even more insidious fear of big oil’s power. In 2012, outside groups spent over $23.5 million in an attempt to unseat Senator Sherrod Brown. Some were found to have oil industry connections, although the exact origin of much of the money is impossible to confirm since “dark money” groups don’t have to disclose their donors. Sen. Brown told Mother Jones:
If you’re thinking about taking on oil companies, be ready for that kind of onslaught.
A senior aide to another senator confirmed the intimidation tactics that the industry has used so effectively:
We have a lot of members who are willing to vote the right way, but they’re not out there fighting the fight on this,” he says. “Do you really want to stick your neck out and attract enormous amounts of money?”
Member of Congress know that a vote against the oil subsidy could very well lead to a flood of attack ads and a major financial boost to their competitor. Many representatives may feel that the subsidies are not a proper way to spend taxpayer dollars, but are scared off by the prospect of picking a fight with such a political powerhouse.
Despite the efforts of Sen. Menendez and his allies, the annual $4.8 billion dollars in annual tax breaks for oil and gas companies lived to fight another day. As we face a massive deficit and budget cuts to social programs across the board, many critics are asking how it is possible that companies such as BP that post massive profits are receiving charity in the form of taxpayer dollars.
Until we see a complete overhaul of they way money is allowed to warp the political process, you can expect more of the same.