Save for later Print Download Share LinkedIn Twitter US President Joe Biden's wide-ranging tax proposal includes a plan to scrap tax benefits for the oil and natural gas industry as a way to pay for clean energy incentives. This could put a financial squeeze on upstream spending -- especially by independents -- if the proposed changes are ultimately approved by Congress. The proposal from Biden's Treasury Department says the oil sector's tax benefits "shift our energy production away from cleaner alternatives, undermining long-term energy independence and the fight against climate change." Treasury wasn't specific about which tax measures it is placing on the chopping block. But its targets likely include eight deductions written specifically for the oil industry, many of which have been part of the US tax code since the early 1900s (OD Jul.29'20). The most valuable deductions, by dollar amount, cover the expensing of intangible drilling costs (IDC) and percentage depletion of wells. The plan argues that fossil fuel companies benefit from "substantial implicit subsidies" since they don't pay for climate damages caused by the burning of their products. All eight oil industry tax deductions were worth a combined $1.2 billion in fiscal year 2019, according to the latest government estimates. Biden said during the presidential race that he would allow "no more subsidies" for any fossil fuels, but decisions on federal tax policy ultimately rest with Congress. President Barack Obama tried unsuccessfully to scrap the eight oil tax deductions in his annual budget requests (OD Jun.4'09). The political landscape may be different now that climate change has risen in urgency, but scrapping incentives for any industry may be tough, given the current focus on economic recovery. On the other hand, ending the oil tax deductions could free up federal funds that Biden could leverage as a way to pay for his ambitious clean energy or infrastructure plans (OD Mar.31'21). Lauren Craft and Emily Meredith, Washington
