Danger season is here, and US taxpayers are facing double jeopardy thanks to a reckless and inhumane Congressional budget bill that hands billions of dollars to the oil and gas industry as it worsens the impact of climate change by withdrawing support for renewable energies and government mitigation programs.
The bill plunders funding for much-needed renewable energy in order to pay for oil and gas industry tax breaks. The industry’s windfall is unsurprising since it’s about halfway to the $1 billion President Trump sought from it in exchange for policy rewards—the oil and gas industry’s contributions to President Trump’s election totaled $450 million by some estimates. Still, the industry is getting a good return on its investment—the bill satisfies all the demands of the policy wish list issued by the American Petroleum Institute (API) soon after President Trump was elected.
The industry already benefits mightily from subsidies, which range from $10 to $40 billion annually in the United States, depending on how they’re estimated. Yet oil and gas production and profits broke records during the Biden administration, with the top five US-based companies bringing in more than $250 billion between 2021 and 2023. It’s hard to know exactly how much cash the oil and gas industry will save thanks to the bill, but efforts during the first Trump administration to lower the corporate tax rate were “probably worth billions” to ExxonMobil, according to a former lobbyist for the company.
Here are the bill’s biggest handouts to the oil and gas industry:
Carbon capture subsidies
The oil and gas industry loves a tax break, and considering how much it has promoted carbon capture, the related 45Q tax credit was a solid bet for surviving the budget bill’s knife. For decades, the federal government has heavily subsidized carbon capture utilization and storage (CCUS), a set of technologies that aims to separate, collect and sequester carbon dioxide from fossil fuel combustion and gas processing. The bill actually enhances the 45Q credit for industry because it allows carbon used to extract more oil from existing wells in a process known as enhanced oil recovery to get the same credit as carbon stored underground. The previous version of the credit gave a bigger write-off for carbon stored underground since it doesn’t contribute to fossil fuel extraction. According to the bipartisan Congressional committee that provides revenue estimates of tax legislation, expanding 45Q will cost an additional $14.2 billion over the next decade, on top of the $36 billion price tag of the original tax credit.
Several oil and gas companies pushed for the credit extension (Occidental CEO Vicki Hollub said she personally lobbied President Trump for the credit) because of their large investments in CCUS. These investments are geared more toward increasing oil extraction than reducing emissions, as well as hoodwinking investors into believing fossil fuel companies can zero out their greenhouse gas emissions without decreasing production. The evidence is clear, however, that CCUS cannot deliver the steep cuts in heat-trapping emissions required to meet near-term climate goals. Only about 45 commercial CCUS facilities currently operate around the world, with a total annual capacity equivalent to about 0.1% of global GHG emissions, according to the International Energy Agency. As UN Secretary General Antonio Guterres has said, carbon capture “cannot be a substitute for drastic emissions reductions or an excuse to delay fossil fuel phase-out.”
Bonus depreciation
This is one of two industry wish-list items championed by Senator James Lankford from Oklahoma. It allows oil and gas companies to write off the full costs of launching and operating drilling rigs in one year, rather than spreading them out over the asset’s lifetime. This helps the industry by lowering corporate annual taxes, which frees up cash and gives companies advantages in various financial transactions. Congress estimates the loophole will cost more than $36 billion over the next decade. The credit was created during the first Trump administration, and Lankford joined with several other congressmembers from fossil fuel-rich states in sponsoring a bill making the credit permanent that was eventually folded into the final budget package.
Exemption from minimum taxes
Hill-watchers worried that proposed legislation allowing oil and gas companies to dodge the corporate alternative minimum tax (CAMT) would end up in the budget bill, and at the last minute their fears proved correct. CAMT, which imposes a 15% minimum tax on companies with profits of $1 billion or more, was created by the Inflation Reduction Act (IRA) specifically to prevent companies from avoiding taxes by abusing loopholes. The oil and gas industry lobbied hard against CAMT and Lankford listened, sponsoring a bill this year that would allow oil and gas companies to deduct drilling costs from CAMT, thereby wiping out taxes for many companies. Though the House version of the budget bill didn’t include any provisions for CAMT, Lankford was able to insert text nearly identical to that of his legislation at the last minute. A congressional committee found the provision will cost taxpayers $1.1 billion over a decade.
Methane fee delay
Methane gas is the largest source of planet-warming pollution from the US power sector, and the oil and gas industry is responsible for 30% of human-caused methane emissions. That’s because huge amounts of methane are released during the extraction process, even though the methane itself is valuable. One study found that 163 billion cubic feet of fossil gas worth roughly $509 million, was wasted on federal and tribal lands in 2019 alone—enough to provide electricity for 2.2 million households for a year.
The IRA put the EPA in charge of collecting a fee on every metric ton of methane that high-emitting oil and gas facilities produce above specific levels, alongside $1.5 billion in financial and technical assistance to help companies reduce methane emissions. The budget bill claws back any unspent EPA money for the Methane Emissions Reduction Program and defers implementation of the fee until 2034. The program was a major target of the oil and gas industry, which tried to stop it in court. Cutting the fee will cost taxpayers more than $7 billion over the next decade according to the Congressional Budget Office, in addition to allowing methane releases to continue.
Reduced royalties
The budget bill repeals sections of the IRA that increased royalty fees for companies extracting oil and gas from federal lands and waters. Royalties were below market rate before the IRA, and this bill lowers the rates below pre-IRA levels to those on par with the 1920s. One analysis estimated the rollbacks will cost US taxpayers $6 billion over the next decade. That’s only federal tax, however: the budgets of states where the public fields are located share in the royalties, so the reductions mean less money for conservation, water projects, and other public benefits paid for by royalties. The bill also requires the Department of Interior to put more public lands on the leasing block, including in the Alaskan Arctic National Wildlife Refuge.
Diminished private investment
The financial impacts of the budget bill stretch beyond just foregone tax revenue: The US economy has already lost more than $15 billion in investments and over 12,000 jobs related to clean energy, and that’s before the bill’s provisions kick in. This loss is the oil and gas industry’s gain, as the bill specifically targeted credits for clean energy industries like wind, solar, electric vehicles, and home energy conservation—industries that fossil fuel companies have worked for decades to undermine. Congress is essentially helping an old industry kill a new one.
Big Oil looks for its biggest break yet: a liability waiver
With the wind at its back, the industry will likely push its luck further. The next item on the industry’s wish list is a liability waiver that would prevent the immensely profitable industry from being held legally accountable for climate change-related damages. API, which is named in several climate lawsuits, spent $2 million lobbying the Trump administration in the first three months of this year on issues including “Efforts related to addressing retroactive liability legislation at the state level.”
Meanwhile, people across the country are dealing with flash floods, wildfires, and other extreme weather events made worse by fossil fuel-driven climate change and the industry’s decades-long campaign to deceive the public and block the transition to clean energy.
One attack on oil and gas industry accountability has already emerged through the District of Columbia appropriations bill, which “would prohibit funds to implement or enforce provisions of the Consumer Protection Act against oil and gas companies for environmental claims.” Other appropriations bills on the horizon could defund efforts by federal regulators to rein in the fossil fuel industry, or include another round of so-called permitting “reform,” which often boils down to providing the industry even more items from its deregulatory wish list.
This industry—with the help of the Trump administration—has truly exposed us to double jeopardy. People across the country are dealing with flash floods, wildfires, and other extreme weather events made worse by fossil fuel-driven climate change. We cannot allow our elected representatives to make the US public absorb all the danger from climate change and pay for it too. Take action today: urge your Congressperson and Senators to reject a liability shield for the fossil fuel industry.