The horrendous tax bill the Republicans just passed was already a big payoff to the oil and gas industry. Besides lowering the nominal tax rate to 21%, it provides for the repatriation of profits at an even lower rate of 15.5%. The bill allows drilling in ANWR. Capital expenses will be fully deductible for the next five years, an important element for a capital intensive business like oil and gas. In addition, the corporate alternative minimum tax was repealed.
But that just wasn't enough winning for the industry. Yesterday, Trump announced that the government would lift virtually all restrictions of offshore oil and natural gas drilling. Even though it will take months to finalize these new plans, this will result in multiple lawsuits and may even prompt attempts at legislative action as Democrats may be joined in their opposition to the plans by some Republicans from coastal states. In addition, the Trump administration has already moved to repeal safety regulations that were put into place after the Deepwater Horizon disaster in the Gulf of Mexico that decimated the environment and the coastal tourist industries of Louisiana, Texas, Alabama, Mississippi, and Florida.
Meanwhile, the Republican Congress let the tax on oil companies that actually funds environmental cleanups expire at the end of last year. The 9 cent per barrel tax on domestic crude oil and petroleum products provided around $500 million per year for the Oil Spill Liability Trust Fund. While that fund currently has $5.7 billion in it, it could be severely strained by another disaster on the scale of Deepwater Horizon, which is hardly an unthinkable prospect.
Of course, the oil industry was hardly struggling to begin with. In the first quarter of 2017, Big Oil had its most profitable quarter in history, with total profits exceeding $50 billion. Moreover, oil prices are still relatively low and the competition from natural gas and renewables is only growing, making new investments largely unattractive, especially with such a long time horizon from exploration to production. All these Trump administration moves really do is put more money in the pockets of these companies' executives and shareholders.
Ed Markey was just on MSNBC commenting on these latest moves by the Trump administration for Big Oil. He summarized it quite neatly, saying that this will allow Big Oil to exploit the environment in order to drill for energy that will for the most part be shipped to China while leaving the costs of environmental damage to be picked up by the taxpayers of the US. According to Trump, however, this is more winning because the plutocrats can pocket more money.
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