Scrutiny of State-Level Fossil Fuels Subsidies Reveals Alarming Pattern

The powerful fossil fuel interests that reap huge subsidies on the federal level have been doing the very same thing on the state level in the US.

In many states, the coal, oil and natural gas industries are  among the most powerful industries, and have been benefiting from political deals for decades.

Earth Track has produced a report that makes a "first pass" at inventorying state subsidies, admitting that they probably have only scratched the surface.

"Even based on the subset of policies we have captured, it is clear that these programs have contributed to the fiscal turmoil in which so many state governments now find themselves, and to significant environmental degradation as well," they say.

In the report, A Review of Fossil Fuel Subsidies in Colorado, Kentucky, Louisiana, Oklahoma, and Wyoming, the group inventories dozens of financial breaks and loopholes that coal, oil and natural gas companies enjoy through the tax code.

These include subsidized credit and insurance, infrastructure provisions, unfunded oversight agencies, direct grants, and below-market resource sales.

There is a great deal of money at play. The Tax Exemption Budget for Louisiana, for example, contains a dizzying array of exemptions, exclusions and reductions that, all told, manage to forego 75% of the state’s corporate income tax revenue, more than half its sales tax revenue, and nearly a third of its severance tax revenue.

Severance tax is incurred when a non-renewable natural resource such as oil, natural gas, coal, uranium or timber is extracted.

Severance tax breaks in Louisiana were worth more than $350 million in 2010, nearly all benefiting the fossil fuel sector.

Colorado has so many exemptions and offsets to severance taxes that only five of the more than 30 oil-producing counties in the state paid any net severance taxes on oil and natural gas.

In Kentucky, the problem is somewhat different. It turns out that a significant (but undocumented) portion of the state’s public transportation funds are going to build coal-haul roads.

Fossil fuel exemptions from state sales and motor fuel taxes are also frequent, and result in significant revenue losses to state Treasuries.

Earth Track’s report builds on a similar analysis from 2011 of state-level support for the fossil fuel industry in Alaska, Texas and West Virginia. It was produced in collaboration with the Organization for Economic Co-operation and Development (OECD), which is publishing a series of reports on fossil fuels at the sub-national level.

Worldwide, governments subsidized fossil fuels with $1 trillion in 2012. As of 2010, subsidies for renewable energy stood at $66 billion. 

Here’s Earthtrack’s report and recommendations: