Oil sector weighs US carbon tax ahead of elections

OREANDA-NEWS. July 11, 2016. The oil and gas industry is taking a fresh look at whether a US carbon tax might be preferable to the climate regulations they can expect if presumptive Democratic presidential nominee Hillary Clinton wins the White House this year.

Oil and gas companies have largely dodged the most stringent greenhouse gas rules under President Barack Obama. But the industry would be next in line if Clinton wins the presidency. Clinton has vowed to move forward with methane emission limits and restrictions on fossil fuel leasing on public lands. She also wants to tighten hydraulic fracturing rules and end tax credits that benefit oil companies.

Oil and gas companies, as a result, have been reviewing if a carbon tax might be better than the uncertainty and costs from the many climate-related rules and policies they expect would accompany a Clinton presidency. Those same industry concerns would not exist if Republican candidate Donald Trump wins the election. Trump has said he would oppose a carbon tax and scrap many regulations.

"It is really all about trying to figure out what happens if Hillary Clinton wins" said American Council for Capital Formation executive vice president George David Banks, who works on energy issues at the Washington, DC-based think tank.

But a carbon tax would face an uphill battle in the US Congress, where Republicans bristle even at the idea of raising the federal gasoline tax for the first time since 1993. US oil companies have substantial sway in Congress. Last year they persuaded Congress to lift 40-year-old restrictions on crude exports. But oil sector divisions mean achieving a repeat legislative victory with a carbon tax is unlikely.

European oil companies BP, Shell, Total, Eni and Norway's state-owned Statoil all have said they support putting a price on carbon, most likely in the form of emissions trading. US oil company ExxonMobil says it supports a revenue-neutral carbon tax, but only if it preempts existing and future regulations it says place a "hidden and inefficient tax" on greenhouse gas emissions.

But Chevron and smaller US oil and gas producers oppose putting a price on carbon, as does the US refinery trade group the American Fuels and Petrochemical Manufacturers. Others are potentially more flexible. The American Petroleum Institute said it would not speculate about its position on a carbon tax without seeing legislation. This position is shared by the trade group the Independent Petroleum Association of America, which says the industry is talking about carbon taxes – but not to a significant degree.

"There have been discussions happening but I would not call them extensive or robust," IPAA's executive vice president Lee Fuller said.

Not even environmentalists could be counted on to back the type of carbon tax that industry supports. Natural Resources Defense Council climate program director David Doniger said the group would oppose any carbon tax that weakens existing environmental laws. He said there is no point discussing industry positions on carbon taxes "until someone floats an actual proposal."

It remains unclear if ExxonMobil and others are willing to put their lobbying muscle behind a divisive carbon tax, when issues such as repealing the renewable fuel standard have far broader oil sector support. ExxonMobil said it will often explain its policy position on a carbon tax to lawmakers but did not say whether it has recently increased those activities.

"I honestly see it as more of window dressing," free market group the Institute for Energy Research's Chris Warren said. "ExxonMobil has in the past said they are open to a carbon tax but they have never actively pushed for one to my knowledge."

If the oil industry begins a more dedicated push to a carbon tax, few expect that push would begin until well into 2017. US regulators by that point plan to have finalized federal regulations restricting venting and flaring of flaring on federal land, while potentially proposing methane limits for tens of thousands oil and gas wells.