Congressional Republicans allowed a tax on oil companies that generated hundreds of millions of dollars annually for federal oil-spill response efforts to expire this week — a move that amounts to another corporate break in the wake of lawmakers’ sweeping tax overhaul late last month.
The tax on companies selling oil in the United States generated an average of $500 million in federal revenue per year, according to the Government Accountability Office. The money, collected through a 9 cents-per-barrel tax on domestic crude oil and imported crude oil and petroleum products, constituted the main source of revenue for the Oil Spill Liability Trust Fund.
The fund has roughly $5.7 billion in reserve. Intended to help the government respond quickly to accidents on land or offshore, it was established in 1986 but only got a stable source of funding in the wake of the 1989 Exxon Valdez spill.
The tax, which expired Sunday, had lapsed before but was renewed under the bipartisan 2005 Energy Policy Act. Federal officials recently had debated whether it should be expanded to apply to oil sands products.
Although GOP leaders opted not to renew the tax in December, they are considering reinstating it retroactively in an “extenders” bill that would revive several recently expired taxes. Industry officials noted that the U.S. Coast Guard or the National Oceanic and Atmospheric Administration could always ask Congress to reimpose it if either felt it was needed.
A White House official did not respond to a request for comment Thursday.
Environmentalists called the tax lapse another industry victory under President Trump at the expense of people and wildlife located near sites susceptible to spills.
“We see it as illustrative of the way in which Trump and the GOP continue to push giveaways for corporate polluters at any cost,” said Lukas Ross, a climate and energy campaigner at Friends of the Earth. “They had a tax bill that disproportionately benefited the fossil fuel industry, and then they allowed a $500 million-a-year tax on that same industry to expire.”
But Randall Luthi, who represents offshore operators as president of the National Ocean Industries Association, suggested in an email that the tax was not critical at the moment. The cleanup trust fund “has never run out of money, nor will it in the near future,” he said.
The fund spent $265 million in Fiscal Year 2015, according to the Coast Guard, and nearly $285 million in FY 2014. In an email, Coast Guard spokesman Lt. Cmdr. David French said that while the tax is its “largest revenue source,” it “continues to receive revenue from other sources such as cost recovery actions, certain Clean Water Act Fines and Penalties, and interest earned” on the fund.
French added that the fund’s current level of $5.7 billion “enables the Coast Guard to spend the maximum amount authorized by law to respond to a major oil spill,” which is $1 billion.
Congressional Democrats, none of whom were at the negotiating table when Republicans hashed out the tax overhaul, are vowing to try to reinstate the oil tax.
“The Oil Spill Liability Trust Fund ensures that when there is a spill, American taxpayers are not left holding the bag to clean up Big Oil’s mess,” Sen. Edward J. Markey (D-Mass.), who as a House member chaired hearings on the 2010 BP Deepwater Horizon oil spill, said in a statement. “We should have a robust trust fund — not just trust that oil companies will do nothing wrong — in case a disaster like the BP spill happens again.”
Sens. Lisa Murkowski (Alaska) and Maria Cantwell (Wash.), respectively the top Republican and Democrat on the Senate Energy and Natural Resources Committee, have put forward a bill updating the 2005 energy law. Their proposal does not contain any tax provisions, however.
An extender package that Senate Finance Committee Chairman Sen. Orrin G. Hatch (R-Utah) introduced just before Christmas would reinstate the per-barrel tax as of Jan. 1 and push its expiration date to the end of 2018. “Discussions on how tax extenders should be addressed are ongoing,” committee spokeswoman Julia Lawless said in an email.
Oil and gas industry representatives have indicated that they would welcome changes to how revenue is collected for the trust fund. The American Petroleum Institute, the industry’s largest lobbying group, opposes renewal of the per-barrel tax. The National Ocean Industries Association has proposed altering the way the fund is replenished.
“It would make sense for Congress to debate on whether the amount in the fund is currently enough to cover future spill removal and cleanup costs,” Luthi said, adding that lawmakers also could consider whether to establish a cap for the fund or a floor that would trigger the tax’s return.
The Coast Guard, which administers the fund, has a poor record of getting companies involved in a spill to repay money spent as part of the cleanup. In 2015, the GAO found that responsible parties were billed $272 million between 2011 and 2013 but that only $39 million was recovered.
The trust fund was heavily tapped after the Deepwater Horizon disaster, which released more than 200 million gallons of oil into the Gulf of Mexico. A fifth of the $5.5 billion in fines BP paid after the accident for violations of the Clean Water Act went to the fund.
Collin O’Mara, president and chief executive of the National Wildlife Federation, said he is optimistic that bipartisan support in the House and Senate will be strong enough to renew the tax. But he questioned why the administration would curtail response funds and alter safety rules at a time when it is pushing to expand oil and gas exploration on land and offshore.
“It’s indicative of a mind-set that safety’s a secondary concern,” O’Mara said Thursday.