from Energy, Security, and Climate and Energy Security and Climate Change Program

An Awful New Industry Talking Point

February 01, 2011

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Fossil Fuels

The New York Times reports this morning on the perennial battle over energy subsidies. In addition to a lovely quote from this blog, the Times has this from American Petroleum Institute (API) president Jack Gerard:

“The federal government by no stretch of the imagination subsidizes the oil industry. The oil industry subsidizes the federal government at a rate of $95 million a day.”

Are you kidding me?

Gerard is referring to royalties and taxes.

Royalties are payments to the public for the fact that Mr. Gerard’s member companies are drilling for and selling oil and gas that ultimately belongs to the American people. In many parts of the world they pay considerably more for the privilege. (Sarah Palin’s Alaska was famous for taking a bigger cut than other U.S. states.) This is not a “subsidy” to anyone – it’s payment for the use of someone else’s resources.

Meanwhile, API members pay taxes just like every other company. (Well, not just like every other company – they get a host of tax breaks that other companies don’t.) But like other companies, they need the government. How would the oil and gas industry of America be doing without police that keep their property safe? Without publicly funded education for scientists and engineers? Without a U.S. military that keeps the world safe for trade in oil? Would the oil and gas industry be better off if it stopped “subsidizing” the U.S. government, and the U.S. government stopped providing its services?

What’s frustrating is that there’s a legitimate debate to be had over the wisdom of removing all the tax benefits that the industry gets. Domestic drilling is no panacea, but everything else being equal, it does tend to benefit the U.S. economy in ways that aren’t captured simply in its bottom line. So long as API insists on making ridiculous claims like the one in the Times article, though, I doubt we’re going to be able to have a sensible discussion.

So please, industry friends, never say you’re subsidizing the U.S. government again. If you need a snappy new talking point, just tell us that you’re doing God’s work.

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