Federal subsidies would be reduced for oil companies that conduct spill-prone, deep-water drilling under a pair of bills introduced Monday by U.S. Sen. Dianne Feinstein, D-Calif., and U.S. Sen. Bill Nelson, D-Fla.
Feinstein’s Deepwater Drilling Royalty Relief Prohibition Act ends federal incentives for deep-sea oil and natural gas drilling, barring the Interior Department from waiving royalty payments that oil companies would otherwise pay when drilling in waters deeper than 400 meters.
“The BP spill illustrated just how devastating oil spills in deep water can be. But even though we understand the great risks and lack the technology to drill safely, unwise incentives that push oil companies to drill deeper and deeper remain in place,” Feinstein said in a news release.
“While oil companies continue to collect record profits, the government should not lose out on royalties that could fund clean energy deployment,” she said. “This is especially egregious at a time when federal budgets continue to contract — it’s time to end this practice and collect reasonable royalty payments from large oil companies for exploitation of public resources.”
Feinstein noted five of the largest oil companies — BP, Chevron, ConocoPhillips, ExxonMobil and Shell — made a combined $118 billion in profits in 2012, but the big three American oil companies (ExxonMobil, Chevron and ConocoPhillips) paid effective federal tax rates in 2011 of only 13 percent, 19 percent and 18 percent respectively.
Nelson’s Oil Spill Tax Fairness Act changes the tax code to deny tax deductions for oil spill-related expenses including legal, clean-up and other costs. Current law lets a company responsible for causing an oil spill is also responsible for the cost associated with cleaning that spill up, and Nelson’s bill would keep such a company from them turning around and writing those costs off as a tax deduction.
This bill was spurred by BP’s efforts to write off its clean-up expenses after the 2010 Deepwater Horizon explosion in the Gulf of Mexico created one of the largest oil spills in U.S. history. The legislation would apply to those responsible for an oil spill in U.S. territorial waters, but not to expenses caused by a natural disaster or an act of war.
“Given the record profits of the big oil companies, I don’t think they need any more help from taxpayers,” Nelson said in a news release.