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Mr. Romney, let’s be honest about subsidies to renewable energy

Mr. Romney, let’s be honest about subsidies to renewable energy

Wally Lafferty
August 19, 2012

A note to my readers: I have received many responses to the letter below, and I wanted to take the opportunity to clarify and correct a couple of points. I appreciate the input from my readers and I believe this letter has been made stronger as a result of the input. Please link this letter to as many websites, Twitter and Facebook pages as you can as it is crucial to get the word out prior to the upcoming election. Feel free to use this information, but remember to credit the Environmental Law Institute as the original source for the data. What follows is my open letter to Governor Mitt Romney’s campaign. I hope enough people link to it that the campaign and the news media will have to address it. Please get the word out as quickly as possible. -Wally

Dear Mr. Romney,

A lot of attention was given to you by the media when you declared you would allow the Production Tax Credit for wind energy to expire at the end of the year. Your campaign went further to claim that you will “end the stimulus boondoggles, and create a level playing field on which all sources of energy can compete on their merits.”

If you truly wish to create a level playing field for all sources of energy, please tell us what you intend to do about tax credits — those that you call stimulus boondoggles — that currently exist for coal, oil and gas. Many of these tax incentives have existed for decades while the fossil fuel-based industry continues to set new records for multi-billion dollar profitability year after year. What is your position on the fact that the vast majority of federal subsidies for fossil fuels and Ethanol were spent to support energy sources that emit high levels of greenhouse gases when used as fuel?

How will you reconcile the fact that the federal government has historically provided, and continues to provide, substantially larger subsidies to fossil fuels than to renewables while fossil fuels produce multi-billion dollar profits? Fossil fuels are a mature, well-developed industry that has enjoyed government support since its inception over 100 years ago, totaling approximately $72 billion between 2002 and 2008. During the same period, renewable fuels, which are a relatively young and undeveloped industry, totaled merely $29 billion and 80% of that went to Ethanol subsidies.

How will you address the fact that the Production Tax Credit for wind energy repeatedly approaches expiration on a regular basis unless Congress and the President decide to extend it, throwing costly uncertainty into the renewable energy business model; while the largest subsidies to fossil fuels have been written into the U.S. Tax Code as permanent provisions? It appears that you like to criticize special tax credits for wind and solar and pretend that the tax incentives to fossil fuels don’t exist. Since powerful lobbyists for the fossil fuel industry have gotten their incentives permanently added to the tax code, you seem to believe that they aren’t tax incentives any longer but just ordinary adjustments to corporate balance sheets.

Since so many Americans are spending a lot of time discussing the upcoming expiration of the PTC, can you please address your plans for…

o             the Credit for Production of Nonconventional Fuels – IRC Section 45K. This permanent tax provision provides a lower tax rate for companies who produce certain fossil fuels.

o             the Oil and Gas Exploration & Development Expense – IRC Section 617. Also known as Intangible Drilling Costs (IDC). This tax provision allows fossil fuel companies to deduct the cost of wages, machinery, or unsalvageable materials. The term “unsalvageable materials” is left ambiguous so it can be applied to a broad range of intangible costs.

o             the Oil and Gas Excess Percentage over Cost Depletion – IRC Section 613. This permanent provision in the tax code allows independent producers and royalty owners to deduct 15% of gross income earned from oil, gas and oil shale deposits. The nature of this tax incentive is nearly equivalent to the wind energy PTC, except that this one has been made a permanent provision in the tax code for fossil fuels.

o             Coal Royalty Payments as Capital Gains – IRC Section 631(c). This permanent provision allows income from the sale of coal under royalty contract to be be treated as a capital gain rather than ordinary taxable income, thereby reducing the tax liability for qualifying individuals. Would you please explain who these qualifying individuals are, and why they deserve this special treatment when profits in this industry are so high?

o             the Credit for Enhanced Oil Recovery Costs – IRC Section 43. This tax credit, also permanently written into the tax code, is available specifically for companies who use hydrocarbon-based tertiary injectant methods.

o             the Exclusion of Alternative Fuels from the Fuel Excise Tax – IRC Section 6426(d). This section further reduces the tax liability specifically for liquified petroleum gas (LPG), P-series fuels, compressed natural gas (CNG), liquefied natural gas (LNG), liquefied hydrogen, liquid coal, and liquid hydrocarbon from biomass.

Those are just a small number of the many tax incentives given to fossil fuel companies that have been written into the tax code as permanent provisions. You have not addressed these in your campaign platform. Do you intend to remove these from the permanent tax code?

Let’s be honest.

I come with an idea. I propose that we extend the PTC long enough for the government to remove the special incentives for fossil fuels from the tax code, thereby leveling government support for all energy sources. Or, we can agree to extend the PTC until the wind and solar industries have managed to add equivalent tax incentives to the tax code that equally benefit them. You said you wanted to create a level playing field. I’m all for it. But allowing the PTC to expire on the basis of “leveling the field for all energy sources” while the fossil fuel industry continues to enjoy their special incentives is the height of government hypocrisy.


Wally Lafferty

A Sustainability Minute blogger

For more information on special tax incentives for all energy sources, see: Estimating U.S. Government Subsidies to Energy Sources: 2002-2008, by the Environmental Law Institute: http://www.elistore.org/Data/products/d19_07.pdf

Link to Mr. Lafferty’s original post w/comments: