President Joe Biden proposes ending common business tax credits for fossil fuel companies, which the Biden administration refers to as subsidies.
The Biden administration’s tax plan would increase the corporate income tax rate from 21 percent to 28 percent to help pay for the administration’s $2.3 trillion infrastructure package. The tax proposal would also provide additional extended federal support for select renewable energy technologies.
Oil fees, gas fees, and leases from resource production on federal lands and offshore are the second largest source of revenue for the federal government, behind income taxes. The Treasury Department estimates ending the targeted tax credits for fossil fuel companies would result in $35 billion in additional revenue for the federal government over the coming decade.
Scapegoating Fossil Fuels
The Biden administration’s “Made in America” tax plan is dishonest and will undermine America’s long-term energy independence, says James Taylor, president of The Heartland Institute, which publishes Environment & Climate News.
“Conventional energy receives virtually no subsidies,” Taylor said. “According to the U.S. Energy Information Administration, wind power by itself receives more subsidies than all conventional energy sources combined.
“Solar power also receives more subsidies than all conventional energy sources combined,” Taylor said. “The only way Joe Biden can claim to fund his massive spending proposals via eliminating ‘fossil fuel subsidies’ is to turn the definition of subsidies on its head.”
Biden’s tax plan uniquely eliminates corporate tax deductions for fossil fuel companies, Taylor says.
“Allowing American conventional energy companies to utilize the same accounting methods available to every other industry in the country is not a subsidy,” Taylor said. “Imposing punitive accounting methods on conventional energy producers, and conventional energy producers alone, is deliberately targeting domestic conventional energy producers for nefarious and unfair treatment, at the expense of America’s energy security.”
Expect More Blackouts
Having failed spectacularly in California and Texas recently, renewables don’t deserve any subsidies, says Robert L. Bradley Jr., the CEO and founder of the Institute for Energy Research.
“Any actual subsidies for oil and gas producers are very small, and the Biden administration is proposing to eliminate what little is left as a knife wound to fossil fuels,” Bradley said. “Wind power’s 13-time-extended Production Tax Credit, as well as the Investment Tax Credit for solar, is favoritism on stilts with an aim to drive out fossil fuels in electricity generation.
“The California and Texas blackouts show what such a policy will do, and adding more ‘unreliables,’ wind and solar power, at the expense of ‘reliables,’ meaning coal, natural gas, and nuclear, in power generation will increase blackouts in the future,” Bradley said.
All special subsidies for energy production should cease, Bradley says.
“Large scale wind and solar were forced onto the electric grid artificially through government support and mandates, and have caused more problems than even free-market advocates anticipated,” Bradley said. “No new renewable capacity should be added, and a natural retirement and disassembly of wind turbines and solar arrays that can’t compete on a level playing field with traditional sources of electricity should commence.”
Assault on Reliability
If the energy provisions of Biden’s tax plan become law, consumers will pay more for less-reliable energy, says Gary Stone, vice president of engineering at Five States Energy, LLC.
“The recent ‘deep freeze’ in Texas and much of the central United States once again demonstrated the unreliability of so-called ‘green’ energy technologies, specifically, wind and solar,” Stone said. “With frozen turbines and no sunlight, no method of practical electrical storage, and a marked reduction in the ability of fossil fuels to respond to the loads after the closing of many coal-fired plants, the electrical grid for all practical purposes collapsed. Or so it seemed to the folks sitting in their cold, dark houses with their pipes freezing up.”
Less Supply, More Demand
Biden would compound the problem by raising taxes and eliminating tax advantages for traditional energy sources, including the Intangible Drilling Cost (IDC) tax law that allows producers to deduct most costs of drilling new gas and oil wells, Stone says.
“The IDC has been long established as a method to encourage producers to take the risk of drilling,” Stone said. “Elimination of the IDC will slow drilling and subsequent production.
“Fewer high-risk wells—the ones that typically find new areas of production—will be drilled, and producers will focus only on the ‘sure things,’ and fewer of those,” Stone said. “Production from existing wells will decline, and there will be less new production to take up the slack, resulting in less supply even as demand increases as economic growth picks up, resulting in higher prices at the pump. Eventually, the United States may have to increase imports to meet demand.”
Stone says we should ask our political leaders one very important question before we embrace the “golden idol of electric cars”: “If the power grids across the nation cannot keep up with demand now, what will it be like when we double or triple the number of electric vehicles on the road?”