The Ethanol Papers - Paperturn manuscript - Flipbook - Page 597
Some of the tax breaks date back nearly a century, when they were intended
to encourage exploration in an era of rudimentary technology, when costly investments frequently produced only dry holes. Because of one lingering provision from the Tariff Act of 1913, many small and midsize oil companies based
in the United States can claim deductions for the lost value of tapped oil fields
far beyond the amount the companies actually paid for the oil rights.
Other tax breaks were born of international politics. In an attempt to deter Soviet
influence in the Middle East in the 1950s, the State Department backed a Saudi
Arabian accounting maneuver that reclassified the royalties charged by foreign
governments to American oil drillers. Saudi Arabia and others began to treat
some of the royalties as taxes, which entitled the companies to subtract those
payments from their American tax bills. Despite repeated attempts to forbid this
accounting practice, companies continue to deduct the payments. The Treasury
Department estimates that it will cost $8.2 billion over the next decade.”
In his encyclopedic book “Alcohol Can Be A Gas,” David Blume writes “Between
1968 and 2000, oil companies received subsidies of $149.6 billion, compared
to ethanol’s paltry $116.6 million.”
On September 23, 2012, Kevin Begos, reporting for Associated Press, wrote a
pro-oil story titled, “Decades of federal dollars helped fuel gas boom.” The subhead of the story was, “Pioneers in gas drilling say government research and
tax breaks helped launch boom.” The story provides valuable insights into why
government subsidies were necessary:
“Over three decades, from the shale fields of Texas and Wyoming to the
Marcellus in the Northeast, the federal government contributed more than
$100 million in research to develop fracking, and billions more in tax
breaks.
Now, those industry pioneers say their own effort shows that the government
should back research into future sources of energy — for decades, if need be
— to promote breakthroughs.
"The government has to be involved, to some degree, with new technologies."
The first federal energy subsidies began in 1916, and until the 1970s they "focused almost exclusively on increasing the production of domestic oil and natural gas," according to the Congressional Budget Office.”
