Natural Resources

Politics, journalism and easy virtue

Earlier this month, a New York Times articles asked, “Do Oil Companies Really Need $4 Billion Per Year of Taxpayers’ Money?”

What would happen if the federal government ended its subsidies to companies that drill for oil and gas? The American oil and gas industry has argued that such a move would leave the United States more dependent on foreign energy.

Many environmental activists counter that ending subsidies could move the United States toward a future free of fossil fuels — helping it curtail its emissions of heat-trapping carbon dioxide into the atmosphere.

…Gilbert Metcalf, a professor of economics at Tufts University, concluded that eliminating the three major federal subsidies for the production of oil and gas would have a very limited impact on the production and consumption of these fossil fuels.

Mr. Metcalf’s analysis is the most sophisticated yet on the impact of government supports, worth roughly $4 billion a year…

Mr. Metcalf’s conclusions suggest subsidies could be eliminated without causing much pain. And if the United States cuts its supports, it will have better standing to demand the same from the many countries that provide big consumer subsidies encouraging the consumption of fossil fuels…

Reports in corporate media giving the size of subsidies to fossil fuel companies reminds of Bill Clinton’s response when questioned about the truthfulness of his Monica Lewinsky admissions:

It depends upon what the meaning of the word ‘is’ is.

Indeed, what is a subsidy?

Should we count tax expenditures? Those reductions in government revenue through preferential tax treatments were discussed in a report by America’s Congressional Research Service:

Tax expenditures do not regularly receive the same level of scrutiny as direct spending programs. …A consequence of the limited oversight placed on tax expenditures is that activities may be supported by tax expenditures that have insufficient political support for funding through a direct spending program.

Fossil fuel companies recognize values gained when sympathetic politicians are there to determine financial policies. Accordingly, oil and gas producers spend extravagantly to ensure and sustain a synergetic relationship. Additionally, in recent years, they’ve courted journalists and media companies whose financial comforts have been in decline. Many of those are targets of easy virtue, as fearless Rafe Mair demonstrates.

flare

The New York Times article quoted above doesn’t even begin to give a full account of fossil fuel subsidies. Overseas Development Institute (ODI), a respected London based researcher, offers a more complete picture in Empty Promises – G20 subsidies to oil, gas and coal production:

G20 country governments are providing $444 billion a year in subsidies for the production of fossil fuels. Their continued support for fossil fuel production marries bad economics with potentially disastrous consequences for the climate. In effect, governments are propping up the production of oil, gas and coal, most of which can never be used if the world is to avoid dangerous climate change. It is tantamount to G20 governments allowing fossil fuel producers to undermine national climate commitments, while paying them for the privilege.

From the report on Canadian subsidies to oil, gas and coal production:

All tax expenditures can occur at both the federal and provincial levels of administration in Canada, with a wide array of national subsidies that total a minimum of $2.5 billion annually when the two are combined. At the federal level, this amounts to a minimum of $1.6 billion, mainly through tax expenditures…

At the provincial level, tax breaks amount to a minimum of $979 million annually, mostly delivered for oil and natural gas exploration activities as relief on royalties by the provinces of Alberta and British Columbia. In Alberta, the province allows for several relief programmes on royalties for oil and gas projects, ranging from oil recovery to low productivity and reactivated wells (OECD, 2012). These amount to an average of $604 million each year. In British Columbia, the Deep Royalty Program, estimated at $249 million annually, provides relief on royalties to producers…

Even the ODI estimate is low. BC’s subsidies to gas companies equal or exceed $1 billion a year. In addition, the province required BC Hydro to spend billions of dollars more for transmission and distribution facilities to deliver electricity to gas producers at prices below the utility’s marginal power acquisition cost.

I have not examined Alberta statistics but I would surmise, even under an NDP government, that province does not now trail BC in providing relief to oil and gas producers. National Observer’s Mike De Souza reported Export Development Canada signed more than $28 billion in deals with oil gas and mining companies.

Researchers trying to calculate the full value of subsidies are hindered because politicians choose to hide or mislabel tax expenditures. British Columbia’s government has given billions in tax credits to gas producers but the information is not directly reported. It can though be calculated from Ministry of Finance documents, including the province’s audited financial statements. However, you will not find this reported in mainstream corporate media.

gas tax expenditures

Why is this information not reported? Perhaps this was explained by Indian writer and broadcaster Swati Chaturvedi who referenced a controversy where an influence peddler was recorded speaking to members of the media. From Journalism: The second oldest profession in the world:

Simply put, the job of the media is to keep the government honest. As the memorable phrase goes ‘speak truth to power’. As the Radia tapes reveal we have collectively failed spectacularly. We seem to have reduced ourselves to dancing elves and dwarfs on a demented ego trip…

 

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