A Review of Fossil Fuel Subsidies in Colorado, Kentucky, Louisiana, Oklahoma, and Wyoming

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A Review of Fossil Fuel Subsidies in Colorado, Kentucky, Louisiana, Oklahoma, and Wyoming A Review of Fossil Fuel Subsidies in Colorado, Kentucky, Louisiana, Oklahoma, and Wyoming Prepared by Doug Koplow and Cynthia Lin December 2012 Earth Track, Inc. 2067 Massachusetts Avenue, 4th Floor Cambridge, MA 02140 A Review of Fossil Fuel Subsidies in Colorado, Kentucky, Louisiana, Oklahoma, and Wyoming Prepared by Doug Koplow and Cynthia Lin December 2012 Earth Track, Inc. 2067 Massachusetts Avenue, 4th Floor Cambridge, MA 02140 About the Authors Doug Koplow is the founder of Earth Track in Cambridge, MA (www.earthtrack.net). His work on natural resource subsidies spans more than twenty years, most recently focusing on fossil fuels, nuclear power, and liquid biofuels. He has advised a variety of governmental agencies, environmental groups, foundations, and trade associations on resource subsidy measurement and reform. Mr. Koplow holds an MBA from the Harvard Business School and a BA in economics from Wesleyan University. Cynthia Lin served as an independent researcher on this project, her third with Earth Track. Ms. Lin has been involved in a number of energy-related technical research topics both in the US and abroad, including geothermal engineering, solar thermal engineering and power plant development, and coal gasification. A graduate from the Massachusetts Institute of Technology with a degree in mechanical engineering and minor in political science, Ms. Lin presently works on energy policy and sustainability in Washington, DC. © 2012, Earth Track, Inc. All rights reserved Earth Track is dedicated to working across the political spectrum to make the scope and cost of environmentally harmful subsidies more visible, and to ensure that complex subsidy instruments are understandable to general audiences. Better information on subsidies informs key policy debates and greatly increases the chance of successful subsidy reform or removal -- a process that can bring tremendous fiscal benefits to countries around the world, as well as improving national competitiveness and environmental quality. Earth Track, Inc. 2067 Massachusetts Ave., 4th Floor Cambridge, MA 02140 Telephone: 617-661-4700 Web: www.earthtrack.net Cover Photo: ImageInnovation Photography Table of Contents Acknowledgements ..............................................................................................................................................vi Executive Summary ......................................................................................................................................... ES-1 1. Introduction .................................................................................................................................................. 1-1 2. Fossil Fuel Subsidies in Colorado .................................................................................................................. 2-1 3. Fossil Fuel Subsidies in Kentucky .................................................................................................................. 3-1 4. Fossil Fuel Subsidies in Louisiana .................................................................................................................. 4-1 5. Fossil Fuel Subsidies in Oklahoma ................................................................................................................ 5-1 6. Fossil Fuel Subsidies in Wyoming ................................................................................................................. 6-1 List of Tables 2-1 Fossil Fuel Subsidies Identified for Colorado ............................................................................................. 2-14 2-2. Fossil Fuel Sector Use of Other State of Colorado Incentives................................................................... 2-17 3-1. Fossil Fuel Subsidies Identified for Kentucky ............................................................................................ 3-18 3-2. Fossil Fuel Sector Use of Other State of Kentucky Incentives .................................................................. 3-22 4-1. Fossil Fuel Subsidies Identified for Louisiana ........................................................................................... 4-32 4-2. Fossil Fuel Sector Use of Other State of Louisiana Incentives .................................................................. 4-40 4-3. Gulf Opportunity Zone Bonds Issued in Louisiana, Totals by Sector ........................................................ 4-61 4-4. Louisiana Gulf Opportunity Zone Bond Approvals - Full Approval and Issuance History ......................... 4-62 4-5. Sales Tax Reductions to Fossil Fuel-related Activities in Louisiana ........................................................... 4-70 5-1. Fossil Fuel Subsidies Identified for Oklahoma .......................................................................................... 5-16 5-2. Fossil Fuel Sector Use of Other State of Oklahoma Incentives ................................................................. 5-19 5-3. Revenues Linked to Fossil Fuels for Oklahoma ......................................................................................... 5-24 6-1. Fossil Fuel Subsidies Identified for Wyoming ........................................................................................... 6-18 6-2. Fossil Fuel Property as a Share of Total State Assets ................................................................................ 6-22 6-3. Revenues Linked to Fossil Fuels for Wyoming .......................................................................................... 6-23 Acknowledgements This review was prepared by Doug Koplow (Earth Track) and Cynthia Lin (Consultant to Earth Track) and is an outgrowth of work undertaken by Earth Track for the Organisation for Economic Development and Cooperation’s (OECD’s) multi-country inventory of esti- mated budgetary support and tax expenditures for fossil fuels.1 Report layout and design was done by the Design Action Collective. The authors are grateful to OECD for initial funding of the work, but take full responsibil- ity for any errors or omissions. Neither OECD nor its member countries are responsible for its content. 1 OECD’s initial inventory was published in July 2011 (Inventory of Estimated Budgetary Support and Tax Expenditures Relating to Fossil Fuels in Selected OECD Countries,COM/TAD/ENV/ JWPTE(2011)11/REV1). An update incorporating some elements of this review will be released in January 2013. ES-1 A Review of Fossil Fuel Subsidies in Colorado, Kentucky, Louisiana, Oklahoma, and Wyoming Executive Summary Although data on fossil fuel subsidies around the world have been growing steadily, most of this information focuses on national level policies. There are thousands of sub- sidies at the state, provincial or local levels as well, but they are largely untracked. The sheer volume of programs makes systematized evaluation of how these subsidies affect energy choice, emissions, and fiscal spending challenging. But it is the wide variation in reporting standards and formats that makes subsidy tracking particularly onerous, and quantification and aggregation nearly impossible. The dollars associated with individual sub-national subsidies are usually smaller than national-level programs. In the aggregate, however, sub-national subsidies transfer bil- lions of dollars to fossil fuel industries just like their federal counter-parts. There is a great deal of money at play here. The Tax Exemption Budgetfor the US state of Louisiana, for example, runs more than 400 pages long. It contains a dizzying array of exemptions, exclusions and reductions that, all told, manage to forego more than 75% of the state’s corporate income tax revenue, 61% of its sales tax revenue, and 31% of its severance tax revenue. Severance tax breaks in Louisiana alone were worth more than $350 million in 2010, nearly all benefiting the fossil fuel sector. Colorado has so many exemptions and offsets to severance taxes that only five of the more than 30 oil-producing counties in the state paid any net severance taxes on oil and natural gas, according to past reviews. In many states, fossil fuel industries routinely capture a significant share of more general state incentive programs as well. Investment decisions are made at the project level, and it is there that all levels and all types of subsidies converge, distorting the economics of one option versus another. States view their ability to tip investment decisions in a positive light. This perspective is somewhat simplistic: the process is often imprecise and opaque, with the industrial facility managers being the only ones to know all the ways they are being subsidized. Too often, different government entities end up bidding against each other for similar types of investments, worsening fiscal imbalances for all with little or no net societal gain. State politicians often have favored industries to which government largesse is directed, replacing economic drivers of market success with political ones. This is one reason why powerful industries are so successful in tapping into more general state subsidies for capital, job creation, and transportation infrastructure support. Recognizing the importance of greater transparency on fossil fuel subsidies, the Organisation for Economic Co-operation and Development (OECD) began building a multi-country inventory of these supports in 2010. The first installment was published in 2011, breaking important new ground by including state and provincial tax expendi- tures and budgetary
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