EDITOR: | October 8th, 2013 | 15 Comments

Time to level the playing field; Allow Renewable Energy to develop by the same rules as Oil

| October 08, 2013 | 15 Comments

tdreaThere is a very unfair fight going on. I find it somewhat ludicrous that the US federal government spends tens of billions of dollars annually (dollars it doesn’t apparently have) subsidizing the oil industry — which extracts finite and diminishing resources from underground — while the industry focused aboveground on wind, solar, portable-energy storage and other renewable energies and green technologies are not afforded nearly the same level of governmental support.

Federal support for the research and development of new energy sources is lower today than at any other point in US history and, as a result, the government is putting the clean-energy sector into a competitive disadvantage. To have true competition in the energy market and ensure economic (we’d actually create jobs instead of exporting them) and national security, government must level the playing field for renewable energies.

Am I attempting to demonize oil and gas? Nope. Not a chance. Fossil fuels have been essential for our survival and prosperity for well over 100 years, we need them now more than ever (any economist will tell you that oil is the lifeblood of the economy) and our quality of life and we will definitively need fossil fuels (in all forms) for the foreseeable future. Regardless of advancements in green technologies and renewable energies, the old oil industry won’t be disappearing anytime soon, certainly not within the lifetime of anyone reading this article. Having said that, we need strategic energy alternatives. We need to be — as much as is humanly possible — independent and self-sufficient.

For 200 years, the US has richly and rightly invested in developing new (and continually improving) sources of energy. From the 19th-century government land grants for timber and coal to the tax expenditures for the oil and gas industry in the early 1900s, to the investment in developing nuclear energy; support for energy innovation has always helped drive economic growth. However, renewable energies have not been treated the same way. When the oil, gas and nuclear industries were forming, federal support for those energies totaled over one percent of US federal spending. Tax considerations, rebates, subsidies, etc. available for the renewable energy industry is less than one-tenth of one percent of US federal spending. That doesn’t make sense and we have to do something about it.

If the goal is to encourage competition in the energy marketplace, then both the aboveground and belowground energy industries have to be treated equally. This is not about cutting all oil subsidies or attacking green energy. This is not about criticizing terrible green investments made in the past or the investments in fossil fuels that have costs billions. This is about fairness. Federal investment is critical to the success of the renewable energy industry. We have to level the playing field so that green technologies and renewable energies are bound by the exact same rules and afforded the same support as the oil industry. And we have to do it now. That is not a new idea. The same was true for coal, which would not have been economically feasible without tax exemptions and incentives. It was also true for offshore drilling, which was deemed unprofitable without royalty waiver and favorable packaging of federal leases.

We must make it a priority in North America to remove all the hurdles and disadvantages associated with renewable and green energies. If we don’t, the technologies will never advance and progress and their true potential (and the associated benefits for society) will never be realized. Energy independence is a matter of national security. It is what North America needs for our economy and our long-term survival — regardless on whether people agree with the science behind climate change. The issue of investing in renewable energies must be front and center in our collective minds. If we, as a society, don’t foster, promote and refine green technologies and renewables, we are doomed in the long term. We’ll keep transferring our wealth to the OPEC countries (and China too).

And for those who are against green technologies and renewable energy, please get your head out of the proverbial sand. You’re betting on the wrong horse. Do some research. See what immense financial sacrifices (I like to call them ‘investments’) were made by governments over the centuries for the energy industry, not to mention infrastructure (highways, freeways, roads, etc.) for society. Why? Because said investments were essential for society to function and for the economy grow, remain strong and prosper for decades. It’s no different now. Although these technologies for renewable energy are still, essentially, in their respective infancies, we need to adapt. I’ll be the first to admit that suggesting renewables will let us rapidly phase off fossil fuels in North America, the BRIC countries or the world as a whole, is laughable. But, long term, we have to plan and work towards just that. In order to move forward and advance, we must innovate the price of renewables downward. We need a dramatic increase in funding for research and development, and financial considerations and incentives to businesses, in order to create the next generations of green technology and renewable energy cheaper and significantly more effective. All technologies advance, improve, optimize over time and, ultimately, become less expensive. Imagine how much more efficient and less expensive these new green technologies and renewable energies will become over time. And those optimized gains promise to come quick. It may sound cliché, but it’s short-term pain (government investment) for long-term gain (affordable, stable, limitless energy).

Green technology and renewable energy are the new oil industry. We need renewable energies to develop by the same rules as oil. The endless clean energy aboveground can compete quite handsomely with the oil belowground; let’s just make it a fair fight.



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  • Gordon Matthews

    Excellent piece Ty, this comment coming from the heart of oil country too! It’s great to hear a strong argument for advancing the development of clean, green, renewable and sustainable energy sources AT THE SAME TIME as we continue to be heavily dependent on fossil fuels to keep this world of ours spinning. We have an awful lot of catching up to do if there’s any hope of getting anything to market that will be competitive and scalable to the point that it can be widely adopted. Until this happens, we will continue to be ever-more heavily dependent on a resource that is only going to become more difficult to obtain and costly (to say nothing of the continued punishment its use continues to inflict on our planet). Thanks again for this article, very well considered and thought provoking.

    October 8, 2013 - 12:24 PM

  • J. Best

    great article and intriguing perspective….enjoyed this Mr. Dinwoodie but where are my Ty facts?

    October 8, 2013 - 1:26 PM

  • hackenzac

    Here here, more green energy but we don’t live in a vacuum and we (the US) need to get away from the idea of exporting dirty fuels like coal and tar sands oil because they don’t pass clean air muster at home. Burning more coal in China is sort of like having an OK to urinate section in a swimming pool and then carrying on as if we are not swimming in it. Breakthroughs in photocells, batteries, electrical generation and motor efficiency are all in the pipeline so supplanting dirty fuels in our lifetimes isn’t so laughable to me.

    October 8, 2013 - 1:43 PM

    • Ty Dinwoodie

      I appreciate your commentary, hackenzac.

      “…supplanting dirty fuels in our lifetimes isn’t so laughable to me.”

      I do hope you’re right and I’m wrong.

      October 8, 2013 - 4:28 PM

  • Metal

    EU to ban cars from cities by 2050
    Cars will be banned from London and all other cities across Europe under a draconian EU masterplan to cut CO2 emissions by 60 per cent over the next 40 years.


    October 8, 2013 - 1:48 PM

    • Ty Dinwoodie

      Thank you for sharing that article, Metal. It was great.

      “…no more conventionally fuelled cars in our city centres.” A glimpse into the future!

      October 8, 2013 - 4:22 PM

  • Ty Dinwoodie

    In keeping with this line of thinking, I have become a huge believer in the urgency (not merely the desire) of rare earths production in the Western world (dysprosium, terbium, europium, neodymium and yttrium, in particular). In my opinion, no one country should produce 95% to 97% of anything we rely on to such a degree. I don’t regard that as strategy, as much as I do just common sense.

    Diversifying global supply of rare earths is vital and it affects us all. As most readers are probably aware, rare earths are used in electronics, fiber optics, laser systems, healthcare and defense, as well as green technologies and renewable energies, like electric and hybrid vehicles, solar technology, wind power, as well as smart-grid and energy storage solutions.

    Note: Not just REEs, but graphite (graphene) as well… it too is officially listed as a ‘critical’ material in both the US and Europe.

    October 8, 2013 - 4:39 PM

  • Tiffany

    Hi everyone. I am not usually the type to comment on an article – but I really felt passionate about the topic Ty has addressed here. I completely agree that the government has not provided anywhere near enough support for the development of renewable energy. Everyone knows that massive sums of money are wasted and mismanaged every year by both Canadian and American governments. I just wish North America would get its act together and jump at this opportunity to lead the way with the development of renewable energy. Thank you for the great article Ty.

    October 8, 2013 - 5:21 PM

  • mdefeo10580

    Thank the writer for bring this issue up, especially now. “Big Oil” does NOT need Uncle Sam’s OVER $7 BILLION PLUS DOLLARS A YEAR IN SUBSIDIES! Why is this not discussed more?!?

    Outdated tax credits that protect oil & gas companies, which will be plenty profitable in a world of $100-a-barrel oil. The oil industrys’ lobbyists like to argue that its array of tax write-offs {which allow companies to deduct everything from drilling costs to the declining value of their wells} aren’t any different than other deductions for less publicly reviled companies. Cutting them will discourage new exploration an put jobs at risk, they claim.

    Yet, some of the breaks are anachronisms that date back almost to the days of John D. Rockefeller. And in a world of permanently high crude prices, there’s very little rationale for subsidizing the bottom lines of companies like ExxonMobil and BP. Make no mistake, either: those profits are perfectly healthy. Between drilling and refining, Exxon’s U.S. operations alone earned $7.5BILLION DOLLARS after taxes in 2012. California-based Occidental Petroleum Corporation, one of the so-called “independent” oil companies and the top oil driller in Texas, raked in $7.1BILLION DOLLARSvia its oil and gas division. Regardless of what happens with green energy {and I want to transition as much as the writer of this article and some commenters appear to} oil and gas subsidies are breaks that, by all rights, have outlived their usefulness. It’s time for them to go. There’s no need to pad Big Oil’s bottom line.

    October 9, 2013 - 8:40 AM

    • Ty Dinwoodie

      Further to your first point, the American Coalition for Ethanol estimates that — when combined with state and local government aid to large oil companies — subsidies amount anywhere from $133.8 billion to $280.8 billion annually from all sources of taxpayer aid that goes to the oil and gas industry. Thank you for your comment.

      October 9, 2013 - 1:46 PM

  • GoBucks

    I hope you all had fun beating up on big oil.

    Every corporation in the US gets to declare business expenses–salaries, equipment/asset depreciation, R&D, etc–on its tax statement. Are you suggesting that these should be taken away from a company simply because they’re in the oil business?

    Why? because they make a lot of money? As a percentage of overall expenses, that huge profit number is well under 10%.

    The alternatives companies get those tax breaks as well. AND, they get something else–roughly 2 cents per kilowatt-hour of power generated. This is not a write-off–it’s a direct payment from you, from me and “the guy behind the tree” to the alternative energy companies. WE send THEM a check.

    Giving a corporation a tax write-off is NOT the same thing as a government expenditure. Remember–the wealth they (we) create is NOT government property.

    The reality is that the oil companies send Uncle Sam a check (royalties) for every gallon they produce on federal lands. They also pay royalties to states.

    I suggest that were we to truly level the playing field, the government should pay the oil companies a couple cents for each gallon of oil they produce. That would be analogous to the power generation payments the wind and solar companies get.

    Also–perhaps the wind and solar people could brief us on their plans to turn their businesses from burden to asset? When will THEY be in a position to pay US royalties for the privilege of using our land to generate power?

    Don’t hand me any of that saving the world stuff–it’s baloney.

    Note to editor–can we please have a little balance in the mix of articles?

    October 18, 2013 - 1:19 PM

    • Ty Dinwoodie

      Who are you? J.R. Ewing? My friend, big oil’s days are numbered. They may not be few in number — true — but they are numbered none the less. But was I attempting to demonize ONG? No. Not at all.
      In fact, I wrote: “Fossil fuels have been essential for our survival and prosperity for well over 100 years, we need them now more than ever (any economist will tell you that oil is the lifeblood of the economy) and our quality of life and we will definitively need fossil fuels (in all forms) for the foreseeable future. Regardless of advancements in green technologies and renewable energies, the old oil industry won’t be disappearing anytime soon, certainly not within the lifetime of anyone reading this article. Having said that, we need strategic energy alternatives. We need to be — as much as is humanly possible — independent and self-sufficient.” But, as always, GoBucks, I thoroughly enjoyed reading your post; you never fail to make me laugh.

      Down to business… The five biggest oil companies are making tens of billions of dollars in profits, while paying artificially low effective federal tax rates and disgustingly low royalties for taking and producing oil and gas owned by ALL Americans. In addition, companies can evade payments into the oil-spill cleanup fund based on specific categorizations of different kinds of petroleum. BTW: what are your thoughts on that? Meanwhile, the five largest public oil companies continue to make billions of dollars in profits every quarter while receiving special tax breaks from Congress.

      Thanks for the accounting lesson, but you are aware that Big Oil skimps on corporate taxes and receives billions of dollars in wasteful subsidies. Right? The biggest three publicly owned US oil companies — ExxonMobil (the world’s most profitable corporation), Chevron, and ConocoPhillips — also paid relatively low federal effective tax rates in 2011. In fact, Reuters reported that their tax payments were “a far cry from the 35% top corporate tax rate.” It estimated that ExxonMobil’s effective federal tax rate in 2011 was 13%, Chevron’s was less than 19%, and ConocoPhillips’s was 18%. Does that seem right, just or fair?

      As I wrote in my title: it’s time to level the playing field and allow renewable energy to develop by the same rules as oil. I’ll be sure to write (many) more on the subject as, judging from the high number of people who read this article, the more sophisticated and forward-thinking InvestorIntel readers apparently enjoy them.

      October 18, 2013 - 2:53 PM

      • GoBucks

        Boy don’t I wish I had some oil stocks!!

        Glad you were amused.

        Yes, big profits–but big outlays to get those profits. Well under 10% earnings.

        SKIMP on taxes? Is it somehow virtuous to simply bend over and let the government nail you as hard as they want? Paying 13% on $10B is a sizable chunk of change. And, face it–your taxes and mine won’t go down one cent if their taxes go up. If you give Uncle more money, he’ll just inject it, like any junkie. None will go to debt reduction.

        What about the President’s fave, GE..?? They paid ZERO. ZIP. NADA. Compared to GE, the oil companies are cash cows for the gummint.

        And you’re begging the question, my friend…WHAT wasteful subsidies? List them and enlighten the rest of us. Please.

        Ahhh, who cares…not like anybody will be knocking on our doors for policy advice… have a nice weekend.

        October 18, 2013 - 4:38 PM

        • Ty Dinwoodie

          I do. Your opinion matters and you make valid points.

          Have a great weekend, GB.

          October 19, 2013 - 5:41 PM

  • GoBucks


    October 25, 2013 - 1:22 PM

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