Rex Tillerson Denies Oil & Gas Subsidies Exist, While Company Profits From Them

Today Rex Tillerson, under oath, denied the existence of fossil fuel subsidies. This is dangerously incorrect. In fact, the Oil & Gas Industry receives more than $17 Billion in Subsidies per year, and according to our new analysis ExxonMobil likely gets as much as $1 billion of that.

Former ExxonMobil CEO, Rex Tillerson, testified in front of the Senate Foreign Relations committee and may be about to head the State Department – and it’s not looking good for the climate.

Under Tillerson and his predecessors, Exxon knew that climate change was happening yet spun a massive disinformation campaign to sow doubt about climate science, and spent hundreds of millions buying influence in Washington to block progress on climate pollution. Today Tillerson was at it again, testifying that the science on climate change, and the impact it might have on the world and our country, is still fuzzy.

But he also upheld another proud oil and gas industry tradition: denying that the oil and gas industry receives subsidies. There’s a pattern here. Whenever the oil industry faces a problem that truly threatens their business model, they deny it exists.

During the Senate hearing, Sen. Shaheen (D-NH), asked Tillerson if he would continue pursuing the G20 pledge, spearheaded by the United States, to eliminate fossil fuel subsidies. He replied, “I’m not aware of anything the fossil fuel industry gets that I would characterize as a subsidy.”

Here’s the exchange:

The industry’s long-time argument is that liability loopholes and sweetheart tax breaks like the Intangible Drilling Costs are not a form of special treatment for the oil and gas industry. In reality, the IDC is specifically designed to make drilling, survey work, clearing ground, workers’ wages, drilling supplies — basically anything you need to produce oil and gas (aka ExxonMobil’s products) — less expensive for oil and gas companies. It’s worth roughly $2.5 billion to US oil and gas producers each year.  It’s also been around for more than a century, and even though Congress has already agreed to phase out tax credits for wind and solar by 2020, they have not agreed on any plans to sunset oil and gas handouts. That sure seems like special treatment.

ExxonMobil’s subsidies

So how has ExxonMobil benefitted from the subsidies its ex-CEO says don’t exist? At Oil Change International, we’ve calculated that ExxonMobil may get as much as $700 million to $1 billion in US government giveaways each year.

The precise amount of subsidies claimed by companies is not public data. So, we estimated it two ways.¹ According to our analyses, the US oil and gas industry receives an annual average of approximately $17 billion in federal and state government subsidies. If we assume that ExxonMobil receives subsidies in proportion to its share of US oil and gas production, then ExxonMobil may receive nearly $1 billion dollars in subsidies from federal and state governments each year.²

Many subsidies to oil and gas companies are handed out based on capital expenditure. So If we instead assume that ExxonMobil receives subsidies in proportion to its share of capital expenditure in the US upstream oil and gas sector, then ExxonMobil may receive nearly $700 million in subsidies from federal and state governments each year.³

Who cares if ExxonMobil gets subsidies?

Well, ExxonMobil for one. And corporate executives want to keep the government handouts coming. In fact, the company spent on average $16 million per year over the last decade under Tillerson’s leadership lobbying congress and federal agencies to keep public money flowing to make their oil and gas projects profitable. That’s a more than 5,000% return on investment. Not bad.

Also, the rest of the American public should care. Oil and gas subsidies are designed to incentivize fossil fuel production, and the more oil is produced, the cheaper it is, and the more of it we burn. That means greater greenhouse gas pollution and worse climate disruption.

If fact, a recent study by the Stockholm Environment Institute and EarthTrack found that oil production subsidies will be responsible for almost half of the remaining oil production in the United States. Burning the oil that subsidies make possible will release more than 8 billion tonnes of climate pollution, equivalent to building 100 coal-fired power plants and running them for 23 years.

And when government giveaways don’t drive new extraction, subsidies simply become extra profits that companies like ExxonMobil can use to fund even more climate denial through lobbying, misinformation, and campaign contributions.

Who else should care? The entire global community. Since 2009, the U.S. has acted as a world leader, at least in rhetoric, in calling on the international community to end their handouts to the fossil fuel industry. The US has led efforts at the G7, G20, and in other international fora.

As Secretary of State, Tillerson would be responsible for advancing this agenda. But you can bet, based on his testimony today, cutting fossil fuel subsidies will not make it onto his list of top priorities.

ExxonMobil likely reaped billions of dollars in fossil fuel subsidies under Rex Tillerson’s watch, and he refuses to admit it ever happened. A climate-denying, subsidy-grubbing fossil fuel executive is not fit to run the department leading U.S. engagement with the rest of the world.

Raise your voice demand Rex Tillerson never becomes Secretary of State: tell your Senators they must #RejectRex.

1  – Annual average of 2013 and 2014 figures. From “Empty Promises: G20 subsidies to oil, gas, and coal production” available at http://priceofoil.org/2015/11/11/empty-promises-g20-subsidies-to-oil-gas-and-coal-production/

2 – Oil and gas production data according to Rystad UCube database, a proprietary industry database. Exxon was responsible for an average of 5.67% of combined oil and gas production during 2013 and 2014. $17 billion in annual subsidies * 5.67% = $963 million

3 – Oil and gas capital expenditure data according to Rystad UCube database, a proprietary industry database. Exxon was responsible for an average of 3.95% of combined oil and gas capital expenditure during 2013 and 2014. $17 billion in annual subsidies * 3.95% = $671 million