Federal Energy Subsidies: Energy, Environmental and Fiscal Impacts - Report and Appendices

Attributed Author or Sponsor
Doug Koplow

Federal Energy Subsidies: Energy, Environmental, and Fiscal Impacts

Doug Koplow, for the Alliance to Save Energy, 1993.

Cover. Main report (PDF). Technical Appendix.

Overview. With a main report and a technical appendix covering nearly 600 pages, this is one of the most detailed analyses of US federal government subsidies to energy produced to date. The summary report provides an overview of subsidy magnitudes across all major and emerging energy resources, demonstrating a large federal bias towards fossil fuels and nuclear power. The data appendix provides extensive background information on how subsidies through the tax code, subsidized lending and insurance programs, grants, trust funds, and regulatory loopholes operate. Though the specific subsidy data are no longer current (the report is based on 1989 values), the methodological approaches and the detailed information on subsidy program types remain extremely useful. 

Findings. Federal subsidies to energy, excluding oil defense, amounted to between $21 and $36 billion in 1989 (1989$). The range reflects the fact that estimates for some programs were evaluated in different ways in different assessments. It also captures the fact that the value of many types of subsidies to recipients is much higher than the direct cost of the subsidies to the Treasury. For example, tax breaks are themselves tax-exempt, boosting their value. Loans, even if at interest rates that allow the Treasury to recover its direct cost of borrowing, often provide credit to beneficiary sectors at rates far below what they could obtain from lenders directly. The report coins the term "intermediation benefits" to describe this incremental subsidy value.

The distribution of subsidies across energy sources was highly skewed. The largest recipients were nuclear fission (29%), oil (24%), coal (22%), and natural gas (12%). Fossil fuels overall captured roughly 60% of the total. Had oil defense costs been included, the oil share would probably have exceeded that for nuclear fission. In contrast, emerging renewables (non-ethanol biomass, solar, wind, geothermal, and hydrogen) captured only 3%. End-use efficiency captured just over 2.5% of total subsidies, or $1 for every $36 in federal support to supply-side resources.

I.Technical Appendix, by Chapter

Cover and Contents [PDF]

B1: Overview to Appendix B and Summary Tables [PDF] [Details]

B2: Tax Subsidies to Energy [PDF] [Details]

B3: Special Excise Fees on Energy [PDF] [Details]

B4: Energy-Related Federal Agency Activities
(Split into multiple files due to size):

B4a:Table of Contents [PDF] [Details]
B4b:Agriculture, Executive Branch, Commerce, Defense [PDF] [Details]
B4c:Energy [PDF] [Details]
B4d:Health and Human Services, Housing, Interior, Labor, Transportation, Environmental Protection, Legislative Branch, Various Smaller Agencies [PDF][Details]

B5: Other Federal Interventions Into Energy Markets [PDF] [Details]

B6: Background Information on Debt [PDF] [Details]

B7: Statistical Background Data [PDF] [Details]

(Best copy currently available; will be upgraded if possible.)

II.View Extract from Entire Report Focused on Nuclear Subsidies  [Nuclear backgrounder PDF]

III.Understanding Numerical Differences between this Study and EIA

The US Energy Information Administration also analyzed government subsidies to energy around the same time. However, their resulting values were much lower (roughly $5 billion versus $36 billion). Many of the limitations of their 1992 work were repeated in a later study they did in 1999/2000, which also identified extremely low levels of subsidization. Learn more about what's behind their low numbers.

IV.Detailed Table of Contents

B1: Overview to Appendix B and Summary Tables B1-1
The type of federal subsidies received by each energy type
High and low estimates for each tax provision
High and low estimates for each federal agency
Qualitative listing of energy excise taxes and intervention with pricing or supply and demand options
Individual charts for each energy type presenting the life-cycle federal interventions
[Return to Chapter Listing] [Return to Scope and Magnitude]
B2: Tax Subsidies to Energy
How Tax Subsidies Work B2-2
The Size of the Benefit B2-4
Who Gets the Money B2-5
Deviations from the Treasury Reference System Definition of Tax Expenditure B2-6
Tax Subsidies Affecting the Energy Sector
Tax Credits B2-12
Alcohol Fuel Investment Tax Credit, Exemption from Motor Fuel Excise Taxes, and Import Tariff B2-13
Alternative Fuel Production Credit B2-14
Investment Tax Credits B2-15
General ITCs for Income-Producing Property Including Utilities B2-17
Geothermal, Solar, and Ocean Thermal B2-17
Biomass, Wind, Waste-to-Energy, Synfuels, Other B2-17
Hydroelectric B2-17
Oil and Gas Enhanced Recovery B2-18
Residential Supply Credits B2-18
Residential Conservation Credits B2-18
Commercial Conservation Credits B2-18
Electric Cars B2-18
Investment Credit for Rehabilitation of Structures, Other than Historic Structures B2-18
Research and Development Tax Credit B2-20
Tax Credit and Seven Year Amortization for Reforestation B2-21
Production Credit for Electricity from Wind and Closed-Loop Biomass B2-22
Reductions in the Effective Tax Rate
Activities or Products Exempt from Taxation B2-23
Tax-Exempt Bond Issues B2-24
Docks, Wharves, Seaports, Harbors B2-25
Solid Waste/Resource Recovery Facilities B2-25
Pollution Control B2-25
Private Power, Public Power, Gas Utilities, and Multiple Utilities B2-26
Environmental Improvements to Hydroelectric Facilities B2-26
New Issues Versus Refundings B2-26
Tax-Exempt Dividend Reinvestment for Public Utilities B2-28
Exclusion of Payments in Aid of the Construction of Gas and Electric Utilities B2-29
Exclusion of Mortgage Interest on Owner-Occupied Homes and Other Tax Expenditure Items Benefiting Real Estate
 B2-30
Tax-Exemption of Black Lung Benefits B2-32
Exclusion of Utility Demand Reduction Payments B2-33
Entities Exempt from Taxation B2-34
Exemption of Certain Mutuals' and Cooperatives' Income B2-35
Tax Exempt Status, Publicly Owned Utilities B2-36
Tax Exempt Status, Government-Owned Entities B2-37
Reduced Tax Rates B2-38
Lower Tax rate on Capital Gains, Including Coal Royalties and Standing Timber B2-39
Reduced Tax Rate on Income Earned by Qualified Nuclear Decommissioning Trusts B2-40
Graduated Corporate Income Tax B2-42
Reductions in the Effective Taxable Basis
Expensing of Costs Normally Capitalized B2-43
Expensing of Construction Period Interest/AFUDC B2-44
Expensing of Long-term R&D Costs B2-45
Expensing Exploration and Development Costs B2-46
Special Rules for Mine Closure and Reclamation Reserves B2-48
Expensing Multi-period Timber Growing Costs B2-49
Expensing of Tertiary Injectants B2-50
Deduction for Clean Fuel Vehicles B2-51
Accelerated Depreciation of Certain Assets B2-52
Accelerated Cost Recovery System/Accelerated Depreciation B2-53
Accelerated Depreciation for Rental Housing and Buildings other than Rental Housing B2-56
5-yr Amortization of Pollution Control Facilities B2-56
5-yr Amortization on railroad rolling stock (rail cars) B2-56
Deferral of Required Income Tax Payments B2-57
Tax Deferral on Shipping Companies that are U.S. Flag Carriers B2-58
Special Deductions B2-59
Percentage Depletion Allowance B2-60
Utility Normalization of Excess Deferred Taxes B2-62
Deduction for Motor Carrier Operating Rights B2-64
Special Definitions of the Taxable Entity
Benefits Due to Specific Congressional Exemptions B2-65
Gas and Oil Exception to Passive Loss Limitation B2-66
Alternative Minimum Tax Relief for Oil and Gas Producers B2-67
Special Treatment of Alaskan Native Corporation Losses B2-68
Domestic International Sales Corporations (DISCs) B2-69
Western Hemisphere Trade Corporation Deduction B2-71
Allowance of Foreign Research Expenditures to Offset Domestic Income B2-72
Benefits Due to Transfer Pricing B2-73
Foreign Tax Credits B2-74
Foreign Sales Corporations B2-76
Tax Deferral on Tanker Subsidiaries and the Foreign Tax Credit B2-77
Safe Harbor Leasing B2-78
Sources B2-79
[Return to Chapter Listing] [Return to Scope and Magnitude]
B3: Special Excise Fees on Energy
Description B3-1
Special Excise Fees on Coal B3-2
Black Lung Trust Fund B3-2
Abandoned Mine Reclamation Fund B3-2
Excise Fees on Uranium B3-3
Nuclear Waste Trust Fund B3-3
Special Excise Fees on Petroleum B3-3
Motor Fuels Excise Fee B3-3
Leaking Underground Storage Tank Trust Fund
Aquatic Resources Trust Fund
Highway Trust Fund
Mass Transit Account
Crude Oil Windfall Profits Tax B3-4
Superfund Feedstock Fee B3-5
Oil Spill Liability Trust Fund B3-5
Airport and Airway Trust Fund B3-5
Other Energy-Related Taxes B3-6
Gas Guzzler Tax B3-6
Summary on Energy Excise Fees B3-6
Sources B3-6
Worksheet Tables Follow the Text
[Return to Chapter Listing] [Return to Scope and Magnitude]
B4. Energy-Related Federal Agency Activities
PDF part 1:  
Chapter B4 Table of Contents  
PDF part 2:  
Introduction B4-1
Structure of the Agency Section B4-12
Department of Agriculture
Commodity Credit Corporation B4-14
Conservation Reserve Program B4-16
Federal Crop Insurance Corporation B4-17
Farmers Home Administration B4-20
Forest Service* B4-21
Rural Electrification Administration B4-26
Other Branches Not Quantified B4-30
(Agricultural Research Service, Cooperative State Research Service, Economic Research Service, Agricultural Conservation Program, Forestry Incentives Program, Soil Conservation Service, Farm Credit System)
 B4-30
Executive Branch
Support for Multi-Lateral Development Banks B4-31
Other Functions* B4-34
(Council on Environmental Quality, National Critical Materials Council, Office of the United States Trade Representative, Agency for International Development, United Nations Environmental Program, Office of Management and Budget, Office of Science and Technology Policy)
Department of Commerce
International Trade Administration* B4-36
Export Administration* B4-36
National Oceanic and Atmospheric Administration* B4-37
National Institute Of Standards and Technology* B4-39
Department of Defense
Army Corps of Engineers B4-41
Navy Supervisor of Salvage B4-43
National Security Costs Related to Oil Transport B4-44
PDF part 3:
Department of Energy
Energy R&D, Waste Management, Environmental Restoration, and Administration B4-46
Atomic Energy Defense Activities Benefitting the Commercial Sector B4-59
Clean Coal Program B4-61
Naval Petroleum and Oil Shale Reserves B4-63
Strategic Petroleum Reserves B4-65
Uranium Enrichment Enterprise B4-67
Nuclear Waste Fund B4-75
Energy Information Administration B4-80
Power Marketing Administrations B4-81

(Alaska Power Administration, Bonneville Power Administration, Southeastern Power Administration, Southwestern Power Administration, Western Power Administration)
Federal Energy Regulatory Commission B4-90
 
PDF part 4:
Centers for Disease Control* B4-91
National Institutes of Health* B4-91
Social Security Administration Black Lung Payments B4-93
Family Support Administration, Low Income Home Energy Assistance Program B4-94
Department of Housing and Urban Development* B4-95
Department of the Interior
Bureau of Indian Affairs* B4-96
Bureau of Land Management* B4-98
Bureau of Mines* B4-103
Bureau of Reclamation* B4-106
Fish and Wildlife Service* B4-107
Minerals Management Service B4-110
Office of Surface Mining Reclamation and Enforcement B4-111
U.S. Geological Survey* B4-113
Department of Labor
Black Lung Program B4-116
Mine Safety and Health Administration B4-117
Occupational Safety and Health Administration* B4-119
Adjudication Services* B4-119
Department of Transportation
U.S. Coast Guard B4-120
Maritime Administration B4-123
Saint Lawrence Seaway Development Corporation* B4-125
Research and Special Programs Administration* B4-126
Federal Highway Administration* B4-127
National Highway Traffic Safety Administration* B4-128
Federal Railroad Administration B4-128
Environmental Protection Agency* B4-129
Legislative Branch: Various Functions* B4-137
General Accounting Office B4-137
Congressional Budget Office B4-137
Environmental and Energy Study Conference B4-137
Joint Committee on Taxation B4-137
Installation of Solar Collectors in House Office Buildings B4-137
Congressional Research Service B4-137
Office of Technology Assessment B4-137
Nuclear Regulatory Commission B4-138
Nuclear Waste Technical Review Board B4-139
Office of the Nuclear Waste Negotiator B4-139
President's Commission on Catastrophic Nuclear Accidents B4-139
International Atomic Energy Agency B4-140
Export-Import Bank B4-141
Federal Emergency Management Agency* B4-144
Federal Maritime Commission* B4-145
Federal Mine Safety and Health Review Commission* B4-145
International Trade Commission* B4-145
National Aeronautics and Space Administration* B4-146
National Institute of Building Sciences* B4-146
National Transportation Safety Board* B4-147
National Science Foundation* B4-148
Occupational Safety and Health Review Commission* B4-149
Railroad Retirement Board* B4-149
Tennessee Valley Authority B4-150
Introductory Tables
Table B4-1: Differences Between the High and Low Estimates for Agency Programs B4-2
Table B4-2: Energy Spending Not Quantified in this Chapter B4-13

*Qualitative description of support for energy provided, but subsidy not quantified.  
[Return to Chapter Listing] [Return to Scope and Magnitude]
B5: Other Federal Interventions Into Energy Markets
Assumption or Shifting of Legal Risks/Indemnification B5-1
Price-Anderson Act Nuclear Liability Cap and Contractor Indemnification B5-2
Underaccrual for Nuclear Decommissioning Costs B5-7
Changes in Market Rules Governing Energy Market Access, Pricing, or Terms of Sale B5-18
Introduction B5-18
Changes in Market Rules on the Supply Side B5-22
Federal Ownership of Energy Resources B5-22
Licensing and Rights-of-Way Grants for Energy Related Activities B5-22
Intervention With the Rights and Options of Private Suppliers B5-24
Export Restrictions B5-24
Restrictions on Production Decisions B5-25
Performance Thresholds B5-26
Direct Ownership of Capacity B5-27
Changes in Market Rules on the Demand Side B5-28
Import Restrictions B5-28
Required Purchases of Particular Energy Services B5-28
Price Controls B5-29
Federal Procurement of Energy Services for Internal Use B5-32
List of Tables
Table B5-1: Evolution of Price-Anderson Liability Coverage B5-3
Table B5-2: Summary of Federal Intervention With Energy Markets through Regulations on Pricing, Access,Terms of Sale, or Through Energy Procurement for Internal Use
 B5-20
Table B5-3: Estimated Federal Ownership of Energy Resources B5-22
Table B5-4: Summary of Interventions from Federal Procurement of Energy Services for Internal Use
 B5-32
[Return to Chapter Listing] [Return to Scope and Magnitude]
B6: Background Information on Debt  B6-1
B7: Statistical Background Data B7-1
Interest Rates and Other Financial Information
Capital Expenditures in the Energy Sector
Energy Shares of Rail and Waterborne Transport
Historical Federal Spending on Energy R&D
Energy Sector Contributions to Selected Environmental Problems
Summary of Cost Studies of Environmental Problems and Regulation
Conversion Data Used to Generate Subsidy Intensity Estimates
Electricity Mix in 1989
[Return to Chapter Listing] [Return to Scope and Magnitude]