25 Apr 2011

It’s about time: GOP House leader Boehner signals willingness to cut oil, coal subsidies

Written by theenergyfix


The move by U.S. House of Representatives Speaker John Boehner to thrust $3.6 billion in annual tax breaks benefiting producers of fossil fuels represents a possible sea-change in the nation’s energy priorities.

Boehner’s comments in an interview on ABC News Monday night could reduce the huge gap between subsidies for oil, coal and natural gas and renewable fuels and sources of electricity. This is a window of opportunity that could slam shut as quickly as it opened. All the reason for clean energy advocates to seize the moment.

“It’s certainly something we should be looking at,” Boehner told ABC News. “We’re in a time when the federal government’s short on revenues. They ought to be paying their fair share. Everybody wants to go after the oil companies and frankly, they’ve got some part of this to blame,” he said.

The dramatic imbalance of clean / green energy subsidies vs. dirty / black subsidies. Infographic credit: Environmental Law Institute

Just because Boehner said it certainly doesn’t mean it’s going to happen this year, next year or ever. He said he wants to “see all the facts” first. Among those facts is the $46.2 billion the oil industry stands to lose over a decade. And here is another, this from a recent study by the Environmental Law Institute (chart at right): from 2002 to 2008, traditional fossil fuels received about $70 billion in subsidies compared to about $12 billion for traditional renewables.

The timing couldn’t be much worse for large oil, coal and natural gas producers. Many large energy companies are expected to report high quarterly profits this week. Meanwhile, unrest in the Middle East has pushed crude oil prices above $110 a barrel. According to the U.S. Energy Department, the average U.S. retail gasoline price reached $3.88 a gallon last week, the highest level since the summer of 2008 when prices reached a record $4.11 a gallon.

Leveling the playing field could provide a significant boost to renewables not only in nominal dollars but by improving the investment climate. Cleaner energy would have fewer hurdles to overcome vis a vis the current, lower purchase costs of fossil fuels, especially natural gas and coal. And those costs do not take in account the risks and burdens they impose, along with oil, on worker safety, clean air and water and national security.

Boehner’s comments go against Republican orthodoxy. The inevitable push-back from the GOP loyalists who support the oil and gas industry will be intriguing to watch. Was this just a trial balloon? Or a legitimate effort to forge a budget solution?

Oil and gas companies predictably argue that abolishing the tax breaks would reduce domestic drilling, cost jobs and increase U.S. reliance on foreign energy suppliers. According to Reuters, American Petroleum Institute chief economist John Felmy said: “This is a tired old argument we’ve been hearing for two years now. If the president were serious about job creation, he would be working with us to develop American oil and gas by American workers for American consumers.”

Curiously,  the leading renewable energy trade associations were not quick to seize an advantage at least in the war of words. Many trade associations have consistently challenged Congress over the imbalance of energy subsidies.



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