Q&A: Rep. Keith Ellison on fossil fuel subsidies

Rep. Keith Ellison

Earlier this month, Rep. Keith Ellison (D-Minn.) and Sen. Bernie Sanders (I-Vt.) announced legislation to eliminate billions of dollars in tax breaks, R&D funding, and other subsidies and loopholes that benefit the fossil fuel industry.

Midwest Energy News spoke with Rep. Ellison this week about the type of benefits he’s targeting with the bill, as well as what’s next for the legislation. Here’s a transcript of our conversation:

MwEN: Why is this issue a priority for you?

Ellison: There are a number of reasons. We need to stop using fossil fuels to completely power our world. I don’t doubt that they will be a feature of our energy portfolio in the future, but we are literally destroying the world. We’ve got to cut the production of carbon and reduce hydrocarbon-based fuel usage.

I think that one of the ways we promote the use of hydrocarbon fuels is by subsidizing them. What we need to do is have a truer picture of the cost associated with these fuels, and that starts with cutting the subsidies, which is probably to the tune of $110-plus billion, which leads me to my next point.

Whether you’re a Republican or a Democrat or anyone in between, our debt-to-GDP ratio is too high. It needs to be reduced significantly. Let’s start by cutting subsidies to companies that already are making record profits, and also the very nature of their industry produces harmful gases released into the atmosphere. Let’s just not pay for that privilege.

Another thing I view as important is I think that in order for renewable energy to have any kind of shot, I think it’s got to at least be on equal footing. Now, we subsidize fossil fuels six times more than we do renewable energy, which is definitely the wrong signal at the wrong time.

It’s important to point out, too, that we are creating moral hazard. A lot of people who are politically conservative talk about moral hazard, and usually they talk about this in the context of the government doing anything for poor people. Well, when we let BP write off the cost of the cleanup of the Gulf, I think that creates moral hazard. Why should BP be careful in what it’s doing in the Gulf, if they could get a government subsidy if they should wreck the Gulf again?

What we need is a greater and a more accurate reflection of the costs associated with that kind drilling, which includes the cost of cleaning up spills on their own nickel, not the public dollar.

How do you define subsidies in this legislation? What are some of the specific spending you’re targeting?

Let me highlight some of the more egregious ones. Fossil fuel companies can now claim that they’re manufacturers and take a deduction aimed at promoting American manufacturing. They’re not actually manufacturers. They’re basically an extractive industry, and manufacturers, I think, is somebody making a product by combining several processes together to make a product. These folks, I think they’re squeezing into something that really wasn’t intended for them. They have an enormous tax break by claiming to be manufacturers. That would save the public $12 billion over 10 years.

Another one: BP, as I already mentioned, can deduct the money they spend on cleaning up oil spills. They should not be able to deduct the money they spend on oil spills. That should be specifically excluded. If you ruin a natural world, you’ve got to pay for it, and nobody is going to pay it for you. Certainly not the American people. That would save about $6.8 billion.

Right now, the total of oil and gas subsidy, if we repeal them, we could repeal a 2004 law that allows oil and gas industry to claim, like I said, that they’re manufacturers. I think that alone would be a big deal.

There’s another thing we do called intangibles. We could eliminate the intangible drilling oil and gas deduction, which allows companies to subtract the cost of their supplies and wages. That’s about $13 billion dollars. Those are just a few.

How did these subsidies come to exist in the first place, and how long have they been a part of our system?

They’ve come into existence at different points in time. There’s not just one big giant oil, gas, coal subsidy bill. There’s different pieces at different times for different things. … They came in because the industry itself used the enormous profits that it has to higher lobbyists and hand out campaign donations to get Congress to do it their way.

What kinds of practical challenges would there be in unravelling or undoing all of these subsidies?

It would be no more difficult than changing any other kind of law. The people who profit from the status quo would fight it fiercely, no doubt. The people who profit from the status quo are not about to hand over their goodies anytime soon. They’ll make up all kinds of stuff to keep it. They’re going to say, “oh, this is going to cause gas prices to go up.”

Well, you know, Exxon Mobil is one of the most profitable corporations in America. So is BP. A lot of them are making money hand over fist. My question is: even if you’re the most capitalistic capitalist in American, why should the government fund and finance a profitable company? It’s irrational.

The only rational way to understand this is to understand it in terms of power. People with power and influence in Washington push stuff to get what they want. What do they want? They want more money. Why? To buy more favors. That’s what it is.

Do you think this would lead to increasing gas prices?

No, I don’t think it would lead to increasing gas prices. I think what it would lead to a reduction in profits in extravagant profits margins at some of these oil, gas and coal companies. But what would be wrong with that? Basically, it would be making them pay a truer cost of production.

What’s the next step for this bill?

We want to get it heard in committee. We want to get it moving. The real first step is to get the American people behind it as an idea, because once we start moving it legislatively, there’s no doubt that the industry is going to weigh in big time to try to stop it. So we need to build a national movement that will help to sustain it and to help members of Congress have the courage to support these kinds of repeals.

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