Writing back in January about President Joe Biden’s order to kill the Keystone XL Pipeline, I warned that that action was just an opening volley in a war on the domestic oil and gas business that would only intensify over the four years of his presidency. Nowhere is that intensification becoming more clear than in the President’s current effort to raise taxes on the industry.
In its “Green Book” related to the administration’s gargantuan omnibus budget bill, the Treasury Department uses this coded language to describe one of the overarching goals of the program: “Replacing fossil fuel subsidies with incentives for clean energy production”. This of course is nonsense, as I have written many times over the past decade.
The oil and gas industry not receive “subsidies” of the type that wind, solar and electric vehicles enjoy, i.e., direct transfer payments from the government to enormous corporations like Tesla, General Motors and Ford totaling billions of dollars every year. Some in the industry – mainly small producers and royalty owners – do benefit from the expensing of intangible drilling costs, which is similar to appliance manufacturers or pharmaceutical companies expensing their own cost of goods sold every year. Small independents and royalty owners also benefit from percentage depletion, a provision that is similar to depreciation of inventory in other industries. Biden proposes to single oil and gas out by repealing those oil and gas-related provisions, which have existed in the tax code for more than a century.