Federal Government Offers Major Incentives for Foreign Oil

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Friday, September 18, 2009 at 10:56 am

Despite stated claims from politicians of every stripe about the desire to free the United States from the grip of foreign energy sources, the federal government has offered $15.3 billion in subsidies for imported oil since 2002, according to a new analysis from the Environmental Law Institute.

The report totals government expenditures on different energy sources, both in direct spending and in foregone revenue resulting from tax breaks. It found that while the government spent $72.5 billion on fossil fuels between 2002 and 2008, it spent just $29 billion on renewables. And if the subsidies for corn ethanol – which is of questionable environmental benefit – aren’t included on the renewables side, the government spent just $12.2 billion on renewable energy over that period.

The government directly spent $16.3 billion on petroleum, natural gas, and coal products, and gave the industry another $53.9 billion in the form of tax breaks. Another $2.3 billion was used for carbon-capture-and-storage technology, nearly all of that in the form of direct government spending. A large portion of that spending — $15.3 billion – is actually designed to support overseas production of oil through the Foreign Tax Credit, which allows U.S. companies to avoid domestic taxes if they have paid royalties in the country of origin.

For renewables, the government allocated just $6.2 billion on tax breaks and $6 billion in direct expenditures. And while most fossil fuel subsidies are written into the U.S. Tax Code as permanent provisions, most subsidies for renewables are short-term provisions included in energy bills or other legislative measures, which has limited their usefulness to the industry.

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