Citizens for Pennsylvania's Future (PennFuture)
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Vol. 15, No. 1 — January 18, 2013
And the award goes to ...

It's award season. The People's Choice Awards, Golden Globes, Independent Spirit, all leading up to the biggie — the Oscars. People look forward to watching these competitions, often vote themselves, criticize how people are dressed, and are overjoyed when their nominees win. The rules are clear, and the results are televised to millions across the globe.

But there's another award that is neither public, nor participatory, but it has a tremendous impact on people worldwide. It knows no season, and is given all the time. There's no real competition involved, the dress code is business suits only, and there are no public announcements or celebrations. In fact, those who give this award constantly say that they are not in the business of picking winners and losers, even as they pick the winners.

The award is big — really big. And it pays off for years. What is it? Public money in energy subsidies and tax breaks. And nearly all of it goes to fossil fuels, leaving crumbs for renewable energy.

A little more than a year ago, the PennFuture Energy Center reported that Pennsylvania was subsidizing the fossil fuel industry to the tune of nearly $3 billion a year. In that report, we revealed that the state's fossil fuel subsidies come primarily in the form of tax exemptions, with a handful of applicable tax credits and grant programs. There are exemptions for the use of fossil fuels, which make these fuels more attractive by lowering their costs to the consumer. There are also exemptions that benefit distributors of fossil fuels, such as exempting natural gas sales from the Gross Receipts Tax, thereby reducing the tax burden on distribution companies, and increasing their profitability. And even though some users of fossil fuels are required to reduce their dangerous and deadly air pollution, they aren't on their own -- Pennsylvania even subsidizes the purchase of pollution control equipment.

The people of Pennsylvania bear much of the human cost of fossil fuels, too. Our families and other businesses pay — in health care costs and lost wages and opportunities and personal tragedy — for the asthma, heart attacks, mercury impacting our children's brains, loss of natural resources, and more.

Since that time, Pennsylvania has added more subsidies. Act 13, the new law on natural gas drilling and fracking which famously strips local municipalities of control over this industrial activity, restricted what impacts the industry must repair and pay for, and gave very few benefits to Pennsylvanians for their collective use of this precious natural resource. And our state is now offering nearly $2 billion in subsidies, as well as reduced environmental cleanup standards, to Shell for building a cracker plant — which will make gas drilling and fracking even more profitable.

It's far from easy finding out who gets these awards and how much is given out, especially on the state level. But the more you dig, though, the more you find. Just recently, we discovered another batch of money awarded to the fossil fuel industry. By and large, they don't have to pay the same sales and use tax that ordinary Pennsylvanians and other industries pay. Any equipment bought to be used for hydraulic fracturing (e.g. cementing, fracturing, acidizing services) is exempt from sales tax. Same with any materials (gases, sand, cement, etc.) predominantly used directly in fracturing services. The fracturing services themselves are exempt. And when they sell their property — you guessed it, that's tax exempt, too. The only bright spot is that the drilling companies DO have to pay the motor vehicle registration for some of their vehicles.

The federal government has long subsidized the production and use of fossil fuels to the tune of billions of dollars per year, and to the considerable benefit of these extremely profitable and mature industries. These federal subsidies trickle down and reduce the amount of taxable income that fossil fuel companies are required to report to Pennsylvania for state taxes.

When the wind and solar industries — the new kids on the block — ask for much lower subsidies and tax treatment, the line is always the same: "Government isn't in the business of picking winners and losers." But that doesn't even pass the laugh test. We all know who the winners are, and who is picking them, even if there's no red carpet.

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