In response to the oil and gas industry’s attempts to preserve access to billions in federal subsidies, Greenpeace USA took a closer look at the membership of the American Exploration and Production Council (AXPC).
Greenpeace analysis revealed that the oil and gas companies that are members of the AXPC received major federal subsidies valued at at least $92 billion since 1998, racked up hundreds of millions in environmental and other fines since 2000, took millions more in the recent COVID-19 bailout packages, laid-off workers, and lavished CEOs with extravagant pay in 2020.
The oil and gas industry works through trade associations to shield its member companies and executives from scrutiny. An Exxon senior federal lobbyist revealed this strategy to the world in a Channel 4 and Unearthed news story.
“We don’t want it to be us, to have these conversations, especially in a hearing. It’s getting our associations to step in and have those conversations and answer those tough questions and be for, the lack of a better term, the whipping boy for some of these members of congress.”
Now the oil industry is desperately trying to preserve its favorable tax treatment as an intense campaign to eliminate billions of dollars in oil and gas subsidies gains momentum. The Senate officially included fossil fuel subsidy elimination in the plans for the forthcoming budget reconciliation bill. The Biden Administration’s FY22 budget called to eliminate $121 billion in subsidies.
Enter the American Exploration and Production Council (AXPC), a “national trade association representing the largest independent oil and natural gas companies in the United States.” AXPC is deploying a last-minute PR campaign and lobbying blitz to convince Democratic policymakers to cave to oil industry demands and abandon a core priority of President Biden’s Build Back Better agenda.
AXPC and other oil industry trade associations are panicking about losing the Intangible Drilling Costs (IDC) deduction. The IDC subsidy allows independent drillers to immediately deduct 100% of certain drilling costs from their tax liability, rather than spreading out those deductions over the life of a well. Larger “integrated” oil companies can deduct 70% of these costs immediately. Research has shown this subsidy allows firms to “lower their taxable income, freeing up cash flow and increasing profitability.”
The Stockholm Environment Institute recently published a pair of studies looking at the impact of a range of U.S. oil and gas subsidies. This research found that when oil prices are higher, subsidies such as the IDC tend to pad company profits, whereas when oil prices are lower, the subsidies can push marginal drilling projects over the threshold into profitability, thereby increasing production. To limit global warming and avoid catastrophic impacts, a recent International Energy Agency (IEA) report warned that no new investments in fossil fuel supply should be made.
Increased oil and gas production means extracting, refining, and burning of fossil fuels and poisoning the air and water of nearby communities, which are disproportionately Black, Brown, Indigenous, and poor. Air pollution from fossil fuels killed 8.7 million people globally in 2018 alone. In the United States, air pollution from burning fossil fuels is linked to an estimated 350,000 deaths every year, with disproportionate impacts on communities of color.
Subsidies to companies that poison our communities are clearly out of step with climate justice and the global consensus to end fossil fuel expansion and mount a legitimate response to the crisis.
Over the past two decades, just three subsidies (including the IDC) provided an estimated hundreds of billions of dollars in value to the oil industry — including over $40 billion per year during times of high oil prices. The vast majority of this value went to independent drillers, with AXPC members Chesapeake Energy, EOG Resources, Pioneer, ConocoPhillips, Devon Energy, and Occidental Petroleum among the biggest recipients (see Figure 4). Chesapeake Energy, which filed for bankruptcy in 2020, is estimated to be the single largest beneficiary of these subsidies during this time period. Even with generous government incentives and bailouts, some oil companies still eliminated thousands of jobs in 2020.
Lawmakers and the public should look at the complete picture of how American taxpayers have consistently been on the hook for billions of dollars to support the oil and gas industry for decades. It is time to level the playing field and stop sending billions in direct subsidies to oil and gas companies from the federal government.
Lawmakers must stay united, overcome the Big Oil propaganda and pressure campaign, and deliver this common-sense climate policy during our collective “code red moment for humanity.” It is time to end fossil fuel subsidies.
Greenpeace USA’s analysis revealed that the 25 AXPC oil and gas company membership:
- Received at least $92 billion in increased value from just 3 major subsidies from 1998-2019.
- Incurred over $700 million in fines for environmental and other violations from 2000 to the present.
- Lavished $188 million in executive pay in 2020, with ConocoPhillips’ Ryan Lance taking home over $28 million last year.
- Many received significant bailouts in 2020 from the CARES Act in the form of favorable tax changes, Federal Reserve bond purchases, and royalty relief for production on federal lands. Diamondback and EOG Resources were included in BailoutWatch’s Hall of Shame.
- Eliminated jobs despite receiving government support. Some of these companies did end up cutting jobs in 2020, including Occidental (2600 workers), Devon (400 workers), and Apache (891 workers).
It’s time to fight back
Tell your Senators and Member of Congress to stop giving our tax dollars to oil companies who are threatening our climate.