http://www.icta.org/doc/Real%
We confess absolute unfamiliarity with the originator, the "International Center for Technology Assessment", of the report we enclose herein via the above link. However, they are, apparently, an established and credible organization, as might be ascertained through the rather lengthy entry concerning them found in the seemingly-omniscient Wikipedia, as accessible via:
International Center for Technology Assessment - Wikipedia, the free encyclopedia
Wherein we're informed that:
"The International Center for Technology Assessment (ICTA) is a U.S. non-profit bi-partisan organization, based in Washington, DC. ICTA aims to provide the public with full assessments and analyses of technological impacts on society. ICTA explores the economic, ethical, social, environmental and political impacts that can result from the applications of technology or technological systems."
They have, according to the full article, been around for a while; and, since much of what they disclose in the report we address in this dispatch echoes similar information developed by the USDOE, which we hope to present in a future dispatch, we elected to submit their assessment of the real costs of liquid fuels for your consideration.
Note that the report was published more than ten years ago; and, that "things" can only have gotten worse.
Further, the report does not address, to any real extent, the alternatives to imported gasoline.
Moreover, much of it is devoted to the costs incurred by the United States simply because we use liquid fossil fuels - no matter where we get them - to power our transportation fleet.
Some of the expenses they detail in their full report would, thus, apply to liquid fuels derived from our domestic Coal, as well as to those we get from natural petroleum, whether foreign or domestic.
Those considerations aside, following, we present some excerpts from the ICTA's assessment that might apply to a real cost comparison of liquid fuels, based on their raw material sources of supply.
And, we attempt summary of their implications for a domestic Coal liquefaction industry, following:
"An Analysis of the Hidden External Costs Consumers Pay To Fuel Their Automobiles
International Center for Technology Assessment; Washington, D.C.: November 1998
This particular report contains an in-depth analysis of the many external costs associated with the consumption of gasoline. This report found that these costs fall into four broad categories and are passed
on to both gasoline users and nonusers by way of higher taxes, insurances costs, and retail prices for items other than gasoline. Effectively, the cost of gasoline is substantially higher than the price consumers pay at the pump, even though the majority of this cost is hidden from the public.
Tax Subsidies: The federal government provides the oil industry with numerous tax breaks designed to ensure that domestic companies can compete with international producers and that gasoline remains cheap for American consumers. Federal tax breaks that directly benefit oil companies include: the Percentage Depletion Allowance (a subsidy of $784 million to $1 billion per year), the Nonconventional Fuel Production Credit ($769 to $900 million), immediate expensing of exploration and development costs ($200 to $255 million), the Enhanced Oil Recovery Credit ($26.3 to 100 million), foreign tax credits ($1.11 to $3.4 billion), foreign income deferrals ($183 to $318 million), and accelerated depreciation allowances ($1.0 to $4.5 billion).
(Please note that the "Enhanced Oil Recovery Credit ($26.3 to 100 million)" would wind up being even further "enhanced" if laws mandating the Geologic Sequestration of Carbon Dioxide, all to be undertaken at the expense of the producers of Coal-based electricity and their customers, were to be enacted.)
Tax subsidies do not end at the federal level. The fact that most state income taxes are based on oil firms deflated federal tax bill results in under-taxation of $125 to $323 million per year. Many states also impose fuel taxes that are lower than regular sales taxes, amounting to a subsidy of $4.8 billion per year to gasoline retailers and users. New rules under the Taxpayer Relief Act of 1997 are likely to provide the petroleum industry with additional tax subsidies of $2.07 billion per year. In total, annual tax breaks that support gasoline production and use amount to $9.1 to $17.8 billion.
Program Subsidies: Government support of US petroleum producers does not end with tax breaks. Program subsidies that support the extraction, production, and use of petroleum and petroleum fuel products total $38 to $114.6 billion each year. ... Other program subsidies include funding of research and development ($200 to $220 million), export financing subsidies ($308.5 to $311.9 million), support from the Army Corps of Engineers ($253.2 to $270 million), the Department of Interior's Oil Resources Management Programs ($97 to $227 million), and government expenditures on regulatory oversight, pollution cleanup, and liability costs ($1.1 to $1.6 billion).
(Concerning the above: How much of the "pollution cleanup" costs incurred by our US Coast Guard and other government agencies during and after British Petroleum's Gulf Oil spill have been repaid by BP? )
Protection Subsidies: Beyond program subsidies, governments, and thus taxpayers, subsidize a large portion of the protection services required by petroleum producers and users. Foremost among these is the cost of military protection for oil-rich regions of the world. US Defense Department spending allocated to safeguard the world's’ petroleum resources total some $55 to $96.3 billion per year. The Strategic Petroleum Reserve, a federal government entity designed to supplement regular oil supplies in the event of disruptions due to military conflict or natural disaster, costs taxpayers an additional $5.7 billion per year. The Coast Guard and the Department of Transportation's Maritime Administration provide other protection services totaling $566.3 million per year.
(How many "protection subsidies" would a Coal Liquefaction industry with production sites strung along the Ohio River, and its tributaries, in our very heartland, actually require, do you suppose?)
The federal government has been extremely generous to oil producers and distributors throughout much of the industry's history. Petroleum companies are the beneficiaries of a significant set of unprecedented
entitlements. Preferential tax codes directly subsidize oil consumption. According to estimates by the Union of Concerned Scientists (UCS), federal corporate income tax credits and deductions result in an effective income tax rate of 11 percent for the oil industry as compared to a non-oil industry average of 18 percent. These corporate taxpayer subsidies, also known as tax expenditures, decrease tax liability through special provisions in the tax code and regulations enacted to provide economic incentives.
(Can we say much, if any, of the above, about our coal "producers"? Granted, at one time, the US Bureau of Mines was, unheralded and largely unappreciated, a creative and productive partner to our Coal industries. But, much of that effort has mutated into the more narrow interests embodied by the Mine Safety and Health Administration, while the rest of it has been assigned to, and, like an unwanted dependent relative, languished and withered under, the auspices of the United States Department of Energy.)
Expensing of exploration and development costs enables petroleum companies to take immediate tax deductions on many types of expenses that other industries must spread over several years.
The ability to expense these costs immediately, regardless of the expected length of income generation from the investments, encourages increased exploration and extraction of domestic oil fields that might not otherwise be economically viable. This subsidy primarily affects integrated oil companies (e.g. Exxon and Mobil), allowing them to immediately deduct 70 percent of intangible drilling costs (costs of wages, fuel, repairs, hauling, supplies, and site preparation). This immediate expensing also allows oil companies to write off capital depreciation (equipment and infrastructure) and costs faster than their assets actually lose value. Intangible drilling costs generally account for 75 to 90 percent of the costs associated with exploiting an oil field.
(Is any of the above true of Coal mining and producing companies? Why not?)
The enhanced oil recovery credit is another subsidy designed to prop up an increasingly noncompetitive domestic petroleum industry. It allows oil companies to take a tax credit for the costs of methods which enhance oil recovery and extend the lives of older wells with higher marginal production costs. New methods developed in the last decade, including the use of chemical injectants and horizontal drilling, have dramatically improved the recoverability of oil from older, heavily exploited fields. However, even with these technological advances, these wells cannot supply oil as cheaply as foreign producers. Enhanced oil recovery methods also pose a serious threat to the environment.
(The "threat" could take the form, as we have documented, of leaks, slow or catastrophic, of "sequestered" Carbon Dioxide used for "enhanced oil recovery". And, again, keep in mind that the oil producers get to take a "tax credit" for using CO2 to recover residual petroleum, in putative CO2 sequestration scams, by using an "enhanced oil recovery" technique that would be paid for by higher utility bills submitted to the consumers of Coal-based electricity.)
Foreign tax credits (FTCs) were intended to enable multinational oil companies to avoid double taxation in the United States and in foreign countries where they are operating. In reality, FTCs enable some oil companies to avoid paying taxes in either jurisdiction. The tax dodging is blatantly obvious when petroleum companies report paying taxes in countries that have no corporate income taxes. Additionally, foreign governments lacking standard corporate income taxes or characterized by rampant corruption often help American oil firms reduce their US corporate tax liabilities. It is standard practice for companies and foreign governments to call royalty payments (which merely count as deductions) income tax and claim them as credits against US taxes owed. It is difficult to estimate the amount lost through this substantial loophole as obtaining tax information in certain countries is practically impossible.
(Would such "FTCs" be applicable to liquid fuels produced from domestic US Coal? Of course not. And, the complicated thing to keep in mind about foreign tax credits is, that, not only are US taxpayers thus snookered into subsidizing the profits of Big Oil, but, US taxpayers are also subsidizing the tax incomes, through the above-noted "royalty payments" scam, of the OPEC nations from whom we import oil. And, considering the nature of the regimes which govern many OPEC nations, "royalty payments" is a painfully accurate way of putting it.)
Deferral of foreign income provides further means for oil companies to avoid taxation. Income generated by foreign subsidiaries of US-owned firms is taxed only when it is repatriated as dividends or other income. The parent firm is able to time the repatriation of profits to its advantage, often deferring its tax liability for many years.
("Income generated" by a Coal conversion factory along the banks of the Ohio River would be "repatriated" rather immediately, one would think.)
State and federal tax code interactions further reduce the amount of taxes paid by the petroleum industry. Most states base their income tax systems on federal tax calculations. The federal adjusted gross income value is often used as a starting point in estimating state tax liabilities. It follows that tax subsidies which reduce federal income taxes will also reduce state income taxes.
(Every journalist and state government representative in US Coal Country should feel some responsibility to see if the above is true in their state, and, if so, an even greater responsibility to correct it.
State and local sales tax rates are another source of preferential treatment for the oil industry. A study published in 1994 found that gasoline is taxed at rates significantly below average sales tax rates.
Provisions in the tax code reflect unparalleled government support of the oil industry and significantly distort of the real price of gasoline.
Obviously, the real price of gasoline bears little resemblance to the number posted at the local service station."
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Obviously.
Now, truth to tell, we don't get the impression, based on the full report, that the ICTA would fall head over heels for Coal liquefaction, either.
But, consider: In 1998, it was estimated that "the Coast Guard and the Department of Transportation's Maritime Administration provide other protection services totaling $566.3 million per year" to the oil industry.
What, given the costs to the US - through the Coast Guard and related agencies involved in the clean up and recovery - incurred by the BP Gulf spill, do you suppose that "$566.3 million", will have inflated to in 2011?
And, note what we consider an egregious abuse: "Foreign tax credits (FTCs) were intended to enable multinational oil companies to avoid double taxation in the United States and in foreign countries where they are operating."
In other words, as we understand it, our multi-national oil companies can deduct, from their US taxes, some of what they pay in taxes to places like, for instance, Saudi Arabia - where they might be operating and are also being taxed.
Individual US taxpayers are thus left, we suppose, to make up through their personal taxes the resulting shortfalls incurred by the tax break-supported lavish lifestyles of oil sheikdom royalty.
We individual US citizens are indirectly, through increased taxes we must pay to make up for resulting income shortfalls incurred by Big Oil's privilege of claiming "FTCs", thus subsidizing both oil industry profits and the ruling elites of alien nations.
Does that sound "right" to you?
Further: Would either "Maritime Administration expenses" or "Foreign Tax Credits" be costs incurred by US taxpayers if we were reliant on a domestic Coal liquefaction industry for our fuels, rather than on the petroleum industry and it's Cartel cohorts?
And, even further, as in: "The enhanced oil recovery credit is another subsidy designed to prop up an increasingly noncompetitive domestic petroleum industry. It allows oil companies to take a tax credit for the costs of methods which enhance oil recovery and extend the lives of older wells with higher marginal production costs", consider:
They are talking, in part, about the mandated sequestration of Carbon Dioxide in old oil wells - the costs for which will be saddled onto our vital Coal, and Coal-use, industries, and, consequently, onto the US individual citizens who work for, or who are dependent upon the products of, those various Coal industries.
And, not only will those costs of CO2 sequestration be saddled onto Coal, but, the oil industry will, it seems, be entitled to take tax credits for utilizing such CO2 sequestration for "enhanced oil recovery".
That, when we have documented, and will document further, that both the oil industry and our US government know full-well that Carbon Dioxide can be productively and profitably reclaimed and recycled in the synthesis of hydrocarbon fuels.
Finally:
"Provisions in the tax code reflect unparalleled government support of the oil industry and significantly distort of the real price of gasoline."
No kidding.
Wouldn't it be far wiser, we must ask, to at least try to parallel that currently "unparalleled government support of the oil industry" through similar support of domestic Coal liquefaction and Carbon Dioxide recycling industries?
Wouldn't at least some of that support, unlike the current support of the oil industry, be returned in the form of wage and income taxes thus arising from fuller employment of US Coal miners and of associated US Coal liquefaction and US Carbon Dioxide recycling industry workers?
As herein, our "federal government has been extremely generous to oil producers and distributors throughout much of the industry's history".