Big Oil Reaps Big Money from Subsidies

It's bad enough that the Deepwater Horizon oil rig (registered in the Marshall Islands) and its owner, Transocean (corporate headquarters in Switzerland), have found tax relief by setting up shop abroad. But a recent New York Times article illustrates exactly how many of your tax dollars Big Oil is sucking up.

Oil production is among the most heavily subsidized businesses in the U.S., with tax breaks - including arcane drilling incentives dating back to 1913 - available at virtually every stage of the exploration and extraction process. According to the most recent study conducted by the Congressional Budget Office, released in 2005, Big Oil's capital investments are taxed at a rate of 9%. That's lower than almost any other industry, considering the overall rate for businesses in general is 25%.

For many small to medium sized oil companies, most of the taxes are eliminated by various credits. Indeed, for these companies, subsidies are so high that the return on investment is often higher after taxes and credits are accounted than before. Various government reports indicate that these tax breaks average about $4 billion a year.

BP, for example, boasts sizable tax benefits from leasing the Deepwater Horizon rig from Transocean. According to a letter sent in June to the Senate Finance Committe, the company used a tax break to write off 70% of rent for the rig. That comes out to more than $225,000 per day since the lease began.

Congress and the Obama administration are working on a bill to cut $20 billion in oil industry tax breaks over the next decade. Unless these reforms are enacted, one has to wonder how long Big Oil will continue to shortchange the American taxpayer?

DeMint Scratches BP's Back

For the President's oil spill inquiry commission to investigate the causes of the BP oil spill, and more importantly to stop it from happening again, they need the power of subpoena. Last week, the House showed overwhelming bipartisan support for granting the commission subpoena power in a vote of 420-1, with the only holdout being ultra-libertarian Ron Paul (R-TX).

It would seem the Senate would have a similarly easy time granting subpoena power through unanimous consent, right? Not on Jim DeMint's watch. Sen. DeMint (R-SC) objected, which had the possibility of delaying the subpoena for several weeks. He did so, he said, not on his own behalf, but on behalf of the Republican conference. They must think DeMint can get away with anything, even taking PAC money from each of the country's biggest oil producers, BP included, since his opposition in this year's Senate race is Alvin Greene, a real "Who's Who" of who the hell is that.

Fortunately, the Republicans have now lifted their hold on granting the power of subpoena to the Gulf oil spill commission, but only because DeMint's actions were so blatantly pro-Big Oil that it was causing a political embarrassment. Even "Smokey Joe" Barton didn't let his buddies at BP off the hook on this one.

For now, Jim DeMint and a couple of "Drill, Baby, Drill" allies in the Senate have backed off to fight another day. It doesn't make their protection of Big Oil any less disgusting.