$135 billion reasons Rex Tillerson is wrong
by Lukas Ross, climate and energy campaigner
It happened about four hours into Rex Tillerson’s marathon confirmation hearing on Wednesday. Senator Jeanne Shaheen (D-N.H.) was grilling the former ExxonMobil CEO and Secretary of State nominee about the billions in subsidies the oil industry receives every year — and his answer left much to be desired.
“I’m not aware of anything the fossil fuel industry gets that I would characterize as a subsidy,” he said. “Rather it is simply an application of the tax code.”
Even If we give Rex the benefit of the doubt, his comment is still somewhere between a gross mischaracterization and a bald-faced lie. The truth is that the fossil fuel industry has enjoyed over a hundred years of special interest subsidies, and if nothing changes the bill for the next decade could reach $135 billion. The biggest and most expensive of these giveaways are part of the tax code, which is probably why Tillerson wants to pretend they don’t exist.
Take a century-old goodie like the deduction for intangible drilling costs. This allows companies like Exxon to immediately reduce their taxable income by the cost of developing an oil well. Almost all other long lasting assets like these are required to deduct capital costs slowly over their useful life. But not oil wells. The result is hundreds of millions in deferred taxes over decades. This amounts to an interest free loan for billions of dollars to Exxon from the federal government. Are they giving those to you and me? There isn’t another way to describe this except as a subsidy. And it isn’t cheap either: intangible drilling costs are projected to cost US taxpayers $2.3 billion next year alone.
Not only are these tax breaks real, but recent research indicates that they are essential to Big Oil’s future profits. Without state and federal subsidies, a recent report from the Stockholm Environment Institute shows that as much as 20 billion barrels of oil would stay in the ground, and as much as half of future US oil production would be unprofitable. Exxon itself is expected to rake in between $700 million and a billion this year alone.
The horror is that if Tillerson becomes Secretary of State, he could bring his self-serving definition of what counts as a subsidy to international forums. He would have the ability to undermine the G20, which committed to a phaseout of fossil fuel subsidies in 2009 thank to U.S. leadership. You have to ask, what happens to this pledge if suddenly our chief diplomat is a lifetime oilman who denies that US oil subsidies even exist?
Nothing that Tillerson said yesterday was comforting to anyone concerned about climate change. He refused to give a straight answer about decades of funding for climate denial after Exxon’s own models confirmed what was happening. And he pulled from patently false denier talking points by claiming that our ability to predict its effects were “very limited.”
Climate change is real, Exxon knew about it, and yes, we can predict its effects. Fossil fuel subsidies are real, they drive investment decisions, and yes, we can count the costs to taxpayers and the climate. If you want to be Secretary of State, believing both of these things needs to be a given. Any Senator who votes to confirm Rex Tillerson is voting to confirm a climate denier.
