Government shouldn't pick winners and losers, except for Big Energy

[one...two...tree 2,762]

The Big Energy industries (oil, coal and gas) along with their political allies like Mitt Romney are waging war against sustainable energy and efforts to transform our energy system and reverse global warming. In many instances, they are aided and abetted by the very powerful nuclear power industry.

One of their main lines of attack (used repeatedly by Romney in his first debate with President Obama) is that the federal government is picking energy “winners and losers.” Romney says he will not invest in “chasing fads and picking winners and losers” among energy technologies and will instead allow the free market to determine energy development.

Romney is right about one thing: The government does pick winners and losers in the energy sector. What Romney has not told the American people, however, is that the big winners of federal support are the already immensely profitable fossil fuel and nuclear industries, not sustainable energy.

As a member of both the Senate energy and environment committees, I am working to stop the handouts to the fossil fuel industry. I have introduced legislation called the End Polluter Welfare Act. Rep. Keith Ellison (D-Minn.) filed the companion bill in the House of Representatives. Our measure calls for the elimination for all subsidies to the oil, gas, and coal industries. Using the best available estimates from the nonpartisan Joint Committee on Taxation and other budget experts, we found that over $113 billion in federal subsidies will go to fossil fuel corporations over the next 10 years. These subsidies benefit some of the wealthiest corporations on the planet, including the five largest oil corporations, which made a combined profit of $1 trillion over the last decade. Unlike sustainable energy incentives, many of these fossil fuel subsidies are written permanently into the tax code by industry lobbyists, which means they never expire.

Let me give you just a few examples of outrageously strong federal support for Big Energy companies:

BP, after causing one of the worst environmental disasters in the modern history of America, was able to take a large tax deduction on the money it spent cleaning up the oil spill in the Gulf of Mexico.

Coal companies are able to sign single-bid sweetheart leases to mine on federal lands without paying fair value in royalties to the taxpayers of this country.

In 2009, ExxonMobil, one of the most profitable corporations in this country, paid no federal income taxes, and in fact received a rebate from the IRS. Many other large and very profitable oil companies also have managed to avoid paying federal income taxes in certain years.

But it is not just fossil fuel companies. The nuclear industry also benefits from massive corporate welfare. The nonpartisan Congressional Research Service reports that the nuclear industry has received over $95 billion (in 2011 dollars) in federal research-and-development support in the last 65 years. Nuclear corporations currently have access to billions in federal loan guarantees to build new plants and enrich uranium. They also have federal tax incentives for mining uranium, producing nuclear electricity, and even decommissioning plants.

Perhaps most significantly, the nuclear industry would collapse tomorrow without a huge nuclear insurance program from the federal government. The Price-Anderson Act could, in the event of an American nuclear disaster, force taxpayers to pay out tens or even hundreds of billions in damage claims. Nuclear power is so risky that none of Mitt Romney’s Wall Street or free-market friends will provide that type of insurance.

Let’s be clear. The war against sustainable energy by the Big Energy companies has been extremely successful. During the last year, with almost unanimous Republican opposition, Congress has not been able to extend a very successful program, the 1603 grant program, which had supported over 20,000 sustainable energy projects and tens of thousands of jobs. Congress also has been unable to extend the production tax credit that primarily supports wind energy. The result has been significant layoffs and cancelled projects in the wind industry.

http://grist.org/politics/mitt-romneys-winners-and-losers/

Edited October 15, 2012 by Commie Appeaser

[SMR 368]

I don't disagree that we should stop subsidies to all energy companies. But I feel this article is a little disingenuous as it cites figures of money spent over long time periods. Nuclear has received $95 billion over the last 65 years. So how much has it received lately? I don't know, but I'm guessing it's not near $95 billion. And tax deductions that oil or coal companies claim can't all be seen as subsidies to oil or coal companies in particular. These aren't the only companies paying little or no taxes on large profits. ExxonMobil paid no taxes due mostly to its international structure and ability to move earnings overseas, not the particular industry in which it operates. The BP cleanup effort would be seen as a business expense by any reasonable accountant and thus counts against the taxable income of the company, as would any other business expense. This article seems to be exploiting the fact that most people have very little understanding of the way that businesses calculate their tax burdens. The implication that subsidies for fossil fuel companies have been codified in permanent tax law is a stretch because most (if not all) of those 'subsidies' are available to all companies.

This is not to say that there are no subsidies to coal, oil, or nuclear companies or that the tax code is fine as it is. There are some subsidies (the bidding process for federal jobs and leases in general is very corrupt, for instance), but they are much smaller than the article implies. The tax code as a whole needs to be re-written.

Edited October 15, 2012 by SMR

[one...two...tree 2,762]

SMR, why should we cut all energy subsidies? We've subsidized energy because it is crucial to our

economic interests as well as our national security. That has been the tradition, so why the sudden change to eliminate those subsidies?

[SMR 368]

SMR, why should we cut all energy subsidies? We've subsidized energy because it is crucial to our

economic interests as well as our national security. That has been the tradition, so why the sudden change to eliminate those subsidies?

I didn't make the tradition the way it is. I'm saying change it because it's a bad system. It's inefficient and corrupt. The problem isn't that winners and losers are being picked (as that is natural and would occur in any system), but that the current system picks winners and losers on the basis of lobbyists and campaign contributions instead of the merit of the ideas being invested in.

Private investment would pay for these types of developments when they have merit if the government would butt out. Right now, that doesn't happen because the government has destabilized the investment climate. Investment managers are very hesitant to back a solar company when the government may come in and back the competition as a political favor. When the playing field is as un-level and unpredictable as green energy is today, people are very wary of putting money down. The payback on solar is not really that far out and there is plenty of private money to fund these types of things but the government has driven it out.

[one...two...tree 2,762]

I didn't make the tradition the way it is. I'm saying change it because it's a bad system. It's inefficient and corrupt. The problem isn't that winners and losers are being picked (as that is natural and would occur in any system), but that the current system picks winners and losers on the basis of lobbyists and campaign contributions instead of the merit of the ideas being invested in.

Private investment would pay for these types of developments when they have merit if the government would butt out. Right now, that doesn't happen because the government has destabilized the investment climate. Investment managers are very hesitant to back a solar company when the government may come in and back the competition as a political favor. When the playing field is as un-level and unpredictable as green energy is today, people are very wary of putting money down. The payback on solar is not really that far out and there is plenty of private money to fund these types of things but the government has driven it out.

Our government invested in oil and coal because those were the available energies at the time. Then when nuclear energy came along, we invested in that. We have long sought out solutions to our energy needs - renewables is following that tradition. Investing in energy made sense back then as it does now. What doesn't make sense is continual investment in energy sources that are outdated, finite and wreak havoc on the environment.

[SMR 368]

Our government invested in oil and coal because those were the available energies at the time. Then when nuclear energy came along, we invested in that. We have long sought out solutions to our energy needs - renewables is following that tradition. Investing in energy made sense back then as it does now. What doesn't make sense is continual investment in energy sources that are outdated, finite and wreak havoc on the environment.

The problem is that the government can't simply call a 1-800 number to invest in 'green energy.' It has to pick individuals and organizations to give or loan money to. The selection process to decide to whom to give the money is fraught with corruption and incompetence, mostly because the government has no real accountability for these decisions (and by its nature never really will without a ground up overhaul, starting with how we elect our leaders). Private investors have real motivation to make the right decisions by the nature of that system.

Edited October 15, 2012 by SMR

[one...two...tree 2,762]

The problem is that the government can't simply call a 1-800 number to invest in 'green energy.' It has to pick individuals and organizations to give or loan money to. The selection process to decide to whom to give the money is fraught with corruption and incompetence, mostly because the government has no real accountability for these decisions (and by its nature never really will without a ground up overhaul, starting with how we elect our leaders). Private investors have real motivation to make the right decisions by the nature of that system.

Back in the day, it was the Rockefellers and railroad tycoons. Where would Haliburton be without government money? I understand the problems with an often imperfect mechanism for industrial innovation forged between government and the private sector, but throwing the baby out with the bathwater because somehow doing the same with renewable energy is 'different' makes absolutely no sense from an historical perspective, and once renewable energy grabs hold of prime share of the energy market, there will be no stopping it's dominance in it's capacity to replace the old energy barons with new ones.

[Bad_Daddy 2,209]

SMR, why should we cut all energy subsidies? We've subsidized energy because it is crucial to our

economic interests as well as our national security. That has been the tradition, so why the sudden change to eliminate those subsidies?

This is the USA, not the USSR. If you can't make it pay then it needs to go away. It's called "capitalism" and that's what it's all about. Remember that the next time you google "fuel tax".

[one...two...tree 2,762]

This is the USA, not the USSR. If you can't make it pay then it needs to go away. It's called "capitalism" and that's what it's all about. Remember that the next time you google "fuel tax".

I take it you don't even know who Rockefeller was? That's pathetic coming from a guy who's whole economic existence relies on pumping oil off of public land. Denial runs deep among the ignorant.

[Bad_Daddy 2,209]

I take it you don't even know who Rockefeller was? That's pathetic coming from a guy who's whole economic existence relies on pumping oil off of public land. Denial runs deep among the ignorant.

http://en.wikipedia.org/wiki/Fuel_tax

[one...two...tree 2,762]

Here ya go, Kip.

http://dailyreckoning.com/investing-in-oil-a-history/

Maybe you could take a few classes on learning how to install solar panels or repair windmills? There will always be jobs in energy, but you gotta stay current.

[Usui Takumi 1,562]

This is the USA, not the USSR. If you can't make it pay then it needs to go away. It's called "capitalism" and that's what it's all about. Remember that the next time you google "fuel tax".

I think there is a broader issue here though. There are resources that we depend on militarily even, that must remain secure. Most Americans probably are not aware for instance how dependent the US military is on rare earth elements from China. In the 80s, China began to systematically buy out or put under US producers who were the original source (and developer) for such elements.

Effectively China has and is waging an economic war against the US. It may already be too late, but really the US government needs to get involved in mining the stuff if it doesn't want the military to be effectively shutdown in the future...something China has already done in the past to Japan.

[Ban Hammer 13,340]

Here ya go, Kip.

http://dailyreckoning.com/investing-in-oil-a-history/

Maybe you could take a few classes on learning how to install solar panels or repair windmills? There will always be jobs in energy, but you gotta stay current.

i don't expect there will be much demand for solar panels in alaska, where it's dark for 6 months of the year...