Menendez Bill Sought to Cut Oil Tax Breaks and Extend Renewable Energy Incentives

On March 19, 2012, Senator Robert Menendez (D-NJ) introduced a bill (S.2204) that would cut tax breaks for oil companies and extend tax incentives for alternative energy production including wind and solar. “This debate is pretty simple. It’s about whose side you’re on. You’re either on the side of Big Oil companies making record profits, or you’re on the side of middle class American families who can’t afford the price at the pump,” said Menendez. The Senate debated his bill the last week of March 2012.

While some opponents argue that a cut in oil tax breaks would result in a further increase in prices at the pump, Menendez said experts from the Treasury Department, the non-partisan Congressional Research Service and oil executives who appeared before the Senate Finance Committee, all said cutting the subsidies would not raise prices.

Menendez noted that the five oil companies (BP, Exxon, Shell, Chevron, and ConocoPhillips) that would be affected by the tax cut made $137 billion in profits last year, and stand to clear $1 trillion over the next ten years. The Menendez legislation would save about $24 billion over the next ten years by cutting oil subsidies. The bill stands to apply about half of that to deficit relief and the rest to extending tax incentives for alternative energy production.

With looming climate change concerns , record breaking gas prices, and foreign oil uncertainty, Menendez argued that now is the optimal time to reduce subsidies to the big oil companies and extend the expiring renewable energy tax incentive. Increasing renewable energy will not only provide a cleaner source of energy, but it will further the U.S.’s energy dependence.

On March 12, 2012, Environmental and Energy Study Institute (EESI) and the Heinrich Böll Foundation held a Congressional briefing which discussed the energy transition occurring in Germany and how that compares, specifically with regard to the solar sector, with the United States. One of the briefing speakers was from First Solar, a strong, quickly growing company with over 100,000 employees, more than double the number in 2009. Installations of PV arrays increased 140 percent in Q3 2011 over Q3 2010. The U.S. solar industry creates jobs in manufacturing components, PV array installation, and system design throughout the United States. The challenge for solar energy is getting to price parity – where solar costs no more than grid energy. Currently, regulatory barriers and high up-front costs are impeding solar power installation, but the price is expected to fall further as volume increases. The United States has a history of subsidizing utilities. In the case of solar, clean energy priorities need to be weighed against the costs of subsidies.