The Senate voted 51-47 today to defeat S. 2204, the Close Big Oil Loopholes Act sponsored by Senator Menendez of New Jersey. The bill would have closed five major loopholes enjoyed by the five largest oil companies including BP, Chevron, ConocoPhillips, ExxonMobil, and Royal Dutch Shell. All told, the bill would have saved taxpayers $24 billion over ten years divided roughly half between deficit reduction and clean energy programs.
Today’s vote sets up an interesting debate dynamic. Some Senators argue that raising taxes on oil companies discourages production, discourages energy independence, and does nothing for spiking gas prices. Others contend that the government should not “pick winners and losers” in the market place by subsidizing one form of energy over another.
Neither position really captures the point of this bill. It’s about fairness. The revenue generated by removing these tax loopholes from companies earning billions annually would have better use directed toward other economic activity. Oil companies do not base their decisions about where and when to drill on the available tax advantages. To be sure, that plays a small role in the overall picture of the economic viability of an oil field. But the more important factors are how much oil is available and how easily it can get to market.
The time has long since past pretending that either oil or natural gas need taxpayer handouts. Performing cutting edge R&D and giving a leg up to fledgling industries with remarkable promise but little capital should receive public investment. Tackling comprehensive issues like energy security and high gas prices takes long-term vision, planning, and a gradual overhaul of our energy infrastructure. For the most part, we should expect the oil and gas industry to contribute their fair share- they stand to gain tremendous profits and they can afford it.