The Senate Committee on Finance held a hearing last week on tax reform and its impacts on energy policy. Among the four witnesses from both the private and public sectors were the former Senator Don Nickles, The Nickles Group; former Senator Phillip Sharp, Resources for the Future; Dr. Dale Jorgenson, Harvard University; and Harold Hamm, Continental Resources Inc. While the hearing covered many types of federal support for energy production, federal subsidies for fossil fuels became a central focus of the debate.

During the hearing, Sen. Nickles argued that the oil and gas industry does not receive subsidies from the federal government because tax breaks—such as the Intangible Drilling Costs (IDCs) and Percentage Depletion Allowance—are not subsidies, but general business tax deductions.

However preferential tax treatment is a massive subsidy. The fossil fuel industry often tries to make the case that the tax breaks they take advantage of—which total over $110 billion over the next ten years—are available to all industry. But many are uniquely beneficial to them. Other industries can’t realistically claim the Intangible Drilling Costs tax credit (created in 1918) or the Expensing of Tertiary Injectants tax credit.

In some cases, core proponents have even denied the very existence of these tax breaks to the oil and gas industry. In response to these claims, PolitiFact completed an analysis in April 2012 which found that “those tax breaks do exist and they benefit the oil industry.”

TCS is already gearing up for tax reform which we expect to start in Congress after the presidential election this fall. We look forward to a substantive discussion to end the market distortion and the illogical set of taxpayer handouts across all energy sectors.

 For more information, please contact Autumn Hanna at (202) 546-8500 x112 or autumn[at]taxpayer.net.