Fiscal watchdog groups are trying to figure out the amount of money oil companies save — and public coffers lose — from federal subsidies as lawmakers debate slashing tax breaks for fossil fuel industries.  

But two new reports come to very different conclusions.  

Taxpayers for Common Sense and the Tax Foundation released separate reports today exploring how much money industry pays to do business in the U.S. and disagreed over whether it’s enough.  

The releases coincide with the debate starting on Capitol Hill today over the $3.5 trillion reconciliation package, where slashing oil and gas subsidies has been flagged by top Democrats as a needed step to offset the cost of infrastructure spending. The Biden administration, too, has committed to slashing benefits offered to the oil and gas sector to raise federal revenues.  

Oil subsidies account for more than $1.7 billion annually in lost federal revenues, according to the report from Taxpayers for Common Sense.  

“This industry is playing taxpayers for fools,” said Steve Ellis, president of the organization. 

The report counts subsidies broadly, from direct tax benefits — like the ability of oil companies to write off equipment and materials used in a well — to tax structures like master limited partnerships, or MLPs. MLPs do not pay corporate income taxes. Instead, they pay out their profit to shareholders, who then pay taxes on it as income.  

The report also digs into the industry’s political access. By its count, 68% of lobbyists working on oil and gas issues have a background working for members of Congress, government regulators or as public officials themselves. 

“There are more oil and gas lobbyists than there are lawmakers, playing with a lobbying budget of $113 million,” Ellis said. “No wonder taxpayers are on the hook.” 

In a separate analysis today, however, the Tax Foundation is critical of how Democrats are defining industry subsidies and found no “substantial tax preference for the fossil fuel industry,” which “pays relatively high levels of tax.” 

The reports said the proposal from the Biden administration to cut tax benefits enjoyed by the oil and gas sector would be punitive, diverge from neutral tax policy and advantage foreign oil producers. The report said the move would potentially carry a marginal environmental benefit.  

The White House has estimated that it can gain $120 billion over 10 years just from several measures, like cutting the tax breaks for oil industry’s expense of equipment that goes down a well. It projects $8.3 billion, for example, saved by eliminating tax credits for enhanced oil recovery and marginal well production.  

But the Tax Foundation said a more effective route to raising income for infrastructure, as well as slashing emissions, would be a tax on consumption of fossil fuels, such as higher gas taxes or a carbon tax.  

“As a general rule, policymakers should aim to treat the fossil fuel industry as fairly and as simply as possible, accounting where necessary for particular features of the industry,” the report said. “If the Biden administration aims to protect the environment and reduce carbon emissions, taxing consumption of fossil fuels is clearly more beneficial than taxing production.” 

The reports were released as Capitol Hill turned to the issue of tax benefits.  

House Natural Resources Committee lawmakers gathered today for a heated debate over a suite of Democrat provisions targeting the oil and gas sector, one part of the larger reconciliation process (Greenwire, Sept. 1).  

In response, four oil and gas organizations, including the Western Energy Alliance, urged committee Chairman Raúl Grijalva (D-Ariz.) and ranking member Bruce Westerman (R-Ark.) to consider the role oil and gas plays throughout the economy. In a letter yesterday, they warned of severe consequences to rural communities and small businesses if tax benefits are cut and proposed provisions like raising federal royalties are enacted.  

“The Committee has spent countless hours discussing environmental justice, yet you are about to implement one of the worst environmental and economic injustices on these rural and tribal communities in the last 100 years,” they wrote.  

Reporter Carlos Anchondo contributed.