Dear Dr. Carson,
Congratulations
on your decision to run for President of the United States. I was at home
writing at the time of your announcement. As a professional speaker and someone
who has spent more than thirty years training speakers, I felt your
presentation was stellar—especially considering that you delivered it without a
note. I even posted the following on my Facebook page: “I have work to do but am
captivated listening to Ben Carson”—which garnered many “likes” and favorable
comments.
I say that to
emphasize that I like you. I am glad that you’ve joined the voices that will be
utilizing the platforms afforded to them as candidates to educate the public as
they expound on important issues facing America today. In fact, the libertarian
leaning Reason Magazine applauded you for this exact reason: “To my
happy surprise, he spent a good chunk of his announcement speech hinting at a
Ross Perot-style crusade against the massive national debt and its drag on the
economic growth.” Matt Welch, Reason’s editor in chief continues: “I would be
happy if he made such talk the centerpiece of his campaign, particularly at a
time when the new GOP congressional majority is already going wobbly on
spending. If the guy’s gonna be sucking up oxygen in the race, he might as well
be focusing monomaniacally on the giant sucking sound of debt service.”
I know you are
not a politician and agree that is an asset for your candidacy. You speak,
refreshingly, off the cuff and from the heart, rather than from a poll-tested
script. As such, you’ll likely say a thing or two—especially in the early days
of your campaign—for you which you’ll later have to apologize (at worst) or dial
back on (at best).
I hope such is
the case with your energy-themed comments during your first speech in Iowa
since your declaration as a candidate, where you quoted President Obama’s
deceptive “$4 billion a year in oil subsidies” line. It is disappointing
to hear you parroting the president, but especially since it is essentially
wrong.
When you use the
term “subsidy,” the public automatically thinks a handout of government cash.
President Obama chose to use it specifically to give his audience in New
Hampshire a negative attitude toward “the oil industry.” Yet, as Forbes
columnist Larry Bell found in his analysis of Obama’s attack
on “fossil fuel subsidies,” the so-called subsidies are far from cash handouts
and some of it doesn’t even go to the industry. I’ll explain.
Bell points out
a broad definition for “subsidy” as used by Oil Change International: “any
government action that lowers the cost of fossil fuel energy production, raises
the price received by energy producers, or lowers the price paid by consumers.”
Though different from public perception, this allows tax deductions—akin to
those used by most industries—to be relabeled.
Three such tax
deductions presently allowed by the IRS are: (The Heritage Foundation offers an
excellent primer.)
1.
Oil
depletion allowance: Applied to small, independent producers (large integrated
corporations haven’t been eligible for this since the mid-1970s), this
deduction allows producers to pass depletion deductions (similar to benefits
available to all mineral extraction, timber, etc.) on to individual investors.
2.
Expensing
drilling costs: Producers can write off expenses in the year occurred rather
than capitalizing them and taking the deductions over several years.
3.
Credit
for taxes to foreign nations: Provides an offset for international companies
that paid foreign taxes so that the companies are not taxed twice on the same
income.
While
oil-and-gas producers are allowed typical cost-of-doing-business tax
deductions, they are singled out to receive fewer tax breaks than other
industries. For example, Bell highlights Section 199 of the “American Job
Creation Act of 2004”—which was intended “to provide a competitive advantage to
domestic companies engaged in product manufacturing, sales, leasing or
licensing, and production-related software activities.” Most businesses engaged
in “qualified production activities” receive a 9 percent deduction from net
income. Yet oil and gas can claim only 6 percent.
Using the broad
definition of “subsidies,” there are some large dollar figures that warrant
review. A summary of the data from a 2010 OECD-IEA report titled: “Fossil Fuel Subsidies and Other Support,”
concludes a total of $4.5 billion for oil-related subsidies in the U.S. in
2010—which may be where the $4 billion talking point comes from. But that, too,
is deceptive.
Energy analyst Robert Rapier broke down the data and found, as reported in Forbes:
The single largest expenditure is just over $1 billion for the
Strategic Petroleum Reserve, which is designed to protect the U.S. from oil
shortages. The second largest category is just under $1 billion in tax
exemptions for farm fuel. The justification for that tax exemption is that fuel
taxes pay for roads, and the farm equipment that benefits from the tax
exemption is technically not supposed to be using the roads. The third largest
category? $570 million for the Low-Income Home Energy Assistance Program. (This
program is classified as a petroleum subsidy because it artificially reduces
the price of fuel, which helps oil companies sell more of it). Those three
programs account for $2.5 billion a year in “oil subsidies.”
As you can see,
understanding the whole fossil-fuel subsidy argument is complicated, but it is
clearly not the cash give-away the anti-petroleum crowd wants people to
believe. And I haven’t addressed all the tax and royalty revenue that comes in
from the oil-and-gas industry.
I know you were
in Iowa and you must have felt that you needed to offer some nod to corn-based
ethanol, but your suggestion that oil subsidies should, instead, be used to
build ethanol-fueling stations, indicates that you are ill-informed on
renewable energy as well.
We could take
apart your comment about ethanol being 50-80 cents a gallon less than gasoline
and being better for the environment—there is plenty to work with there. But
for brevity, I am going to stick with the subsidy theme and expand it to
include renewables.
Because energy
subsidies are complicated, I think the easiest way to look at them is using an
energy-received-for-dollar-spent model—which is a good indicator of how federal
dollars are being used and the value the nation is getting from them.
The Energy
Information Administration (EIA), at the request of Congress, recently updated
a study it did in 2010 that evaluated the amount of
subsidies the federal government provides energy producers for fiscal year
2013. In short, it found, as reported by the Institute
for Energy Research (IER): “The largest increases in federal energy subsidies
were in electricity-related renewable energy, which increased 54 percent over
the 3-year period, from $8.6 billion to $13.2 billion. Total fossil fuel
subsidies declined by 15 percent, from $4.0 billion to $3.4 billion.”
IER took the
numbers from the EIA study and calculated the federal subsidies and support per
unit of electricity produced. It concluded: “On a per dollar basis, government
policies have led to solar generation being subsidized by over 345 times more
than coal and oil and natural gas electricity production, and wind is being
subsidized over 52 times more than the more conventional fossil fuels on a unit
of production basis.”
The Independent
Petroleum Association of America did a similar analysis based on the EIA’s
2008 numbers. At the time, it found: “On this basis, the highest figure by far
is for ethanol and biofuels, at $5.72 per million BTU for 2007, with oil and
gas coming in at just 3 cents per million BTU.”
Dr. Carson,
while supporting renewable energy, like ethanol, may seem vogue, because you
are running for the highest office in the land, I encourage you—and all
presidential candidates—to learn from the recent elections in the UK.
Consider this:
Climate Change Secretary Ed Davey became the first cabinet minister to lose a
seat in almost twenty years. Davey, according to the UK’s Mirror,
“claimed credit for leading the bid to secure a ‘massive increase’ in renewable
electricity in the UK and …he led negotiations for the UK on the world stage at
UN climate talks in Qatar, Poland and Peru.” By comparison, Prime Minister David
Cameron, who while campaigning in Montgomeryshire, promised if he was
re-elected: “We’ll scrap funds for wind farms.” Regarding the unpopular project,
Cameron said: “I will seek a further careful consideration of this wind
farms/power lines project. It’s financial and environmental madness. It should
be abandoned.” Though not predicted, Cameron won “the sweetest victory,” while
“Labour was virtually wiped out in Scotland and the Liberal Democrat vote
collapsed,” reported The Daily
Telegraph.
Dr. Carson, I
know you are smart, very smart, but you know medicine. You need very smart
people to advise you on energy policy now, before you address the topic any
further. I have a cadre of energy experts that I could make available to
you—and any candidate who wants smart energy policy.
Call me, maybe?
The author of
Energy Freedom,
Marita Noon serves as the executive director forEnergy Makes America Great Inc. and the
companion educational organization, theCitizens’ Alliance for Responsible Energy
(CARE). She hosts a weekly radio program: America’s Voice for Energy—which
expands on the content of her weekly column.
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