istock

Big Coal and Big Oil know that, in their business, political friends are worth their weight in gold. An academic study of one case of corporate lobbying estimated the return on investment at 22,000 percent: a dollar spent earned $220. Jack Abramoff, the convicted, influence-peddling super-lobbyist, pegged the return on investment of one project at 100,000 percent: $4 million dollars in lobbying cash purchased a $4 billion tax break for Tyco International.

Inspired by paybacks like those, the dirty-energy industry lavishes money on campaigns and lobbying. Not surprisingly, among its favorite sons are Rep. Joe Barton (R-Texas), who famously apologized to BP for Congress’s criticism during the Gulf oil disaster, and Sen. James Inhofe (R-Oklahoma), who insists the science of global warming is a hoax and has likened the US Environmental Protection Agency to the Gestapo. Rep. Barton has raked in $1,914,183 and Sen. Inhofe $1,287,950 from Big Coal and Oil—amounts that bring to mind social critic Upton Sinclair’s observation: “It is difficult to get a man to understand something when his salary depends upon his not understanding it.”

But what about Cascadia, with our hydropower and wind turbines, energy efficiency and smart growth? Does the lucre of Big Coal and Oil taint our delegation to Congress too? We pulled the numbers from the Dirty Energy Money Campaign, which compares recent Congressional votes on a dozen indicative energy policy issues with campaign contributions from fossil energy companies. The answer is unpleasant: even in the Northwest, Big Coal and Oil are dumping train loads of cash on our democracy—almost $5 million since 1999—and the main recipients are hewing to the dirty-energy line. These figures actually understate dirty-energy political money dramatically. They reflect campaign contributions made by energy companies and their key  employees. They ignore contributions made by major investors in these companies and the huge sums of political money that filter to candidates or their election through the bank accounts of lobbyists, PACs, and Super-PACs. Think of these figures as the tip of the iceberg: the visible part but not the most dangerous part.

In the figure below, Cascadia’s representatives in the US House of Representatives and Senate appear by state and party. Their contributions since 1999 from coal and oil companies show up as the length of their bar, and the percentage listed with each bar displays the share of the time that they have sided with the fossil-fuel interests in twelve key votes. Seven of the top eight recipients of dirty-energy political dollars voted with Big Coal and Oil 100 percent of the time. Of the twelve who received the least dirty-energy money, nine never voted with Big Coal and Oil, two voted with them just once, and only one voted the Big Coal and Oil line.

In the Northwest, Alaska and Montana are the main oil and coal producers, and their delegates get the vast majority of political money from Big Coal and Oil. As the figure below shows, the average Alaskan member of Congress has received more than five times as much as the average Oregon member. Until recently, Washington and Oregon have not been major players in the fossil-energy industry; however, with the coal-export debate raging, more coal cash may infiltrate the states.

Contributions may also swing from oil to coal interests. In the past, oil—with its higher profits—has been the bigger gusher of political money, as the figure below illustrates.

Dirty-energy political money flows from a long list of companies. ExxonMobil leads the contributors to members of the current Congress, followed by Koch Industries and Chevron. Among the top ten (shown above) are also well known petroleum companies such as ConocoPhillips and BP. Less-familiar names include Fluor, which does engineering, construction, maintenance, and the like for big energy companies; it also does work at the Hanford Nuclear Reservation in Central Washington. The Southern Company owns power utilities that burn a lot of coal in Georgia and other southern states. Williams is a giant, Oklahoma-based natural gas company.

These ten companies accounted for about 30 percent of all dirty-energy political contributions made since 1999 to incumbent members of Congress from the Pacific Northwest. Each state has its own particular mix; for example, the top contributor in Montana is PPL, which does not support any politicians in Washington State. PPL, among other things, is part owner of the enormous Colstrip coal-fired power complex that sells electricity into Cascadia from eastern Montana.

Members of the Republican Party get three times more dirty-energy money than do Democrats. The average Republican hauled in over $300,000 in donations from Big Coal and Oil, with Alaska Senator Lisa Murkowski receiving the most at nearly $1 million, more than all contributions to Washington State’s senators and representatives combined. In contrast, Democrats averaged less than $100,000 each, a number that drops to $54,000 if we exclude Montana’s senior senator Max Baucus, who has received $661,000 since 1999.

If we were to take the standard view on this issue, we would expect a direct correlation between the amount of political money a politician received from Big Oil and Coal, and the way she or he voted on subsequent legislation. But as Lawrence Lessig establishes in his new book Republic, Lost, that’s not how money corrupts our democracy. The process is more subtle and ruinous: politicians, who spend more time fundraising than doing any other single waking activity, develop a sixth sense for their funders’ interests. Their positions on issues often lean toward money long before they even solicit contributions from a source. As former lobbyist Jimmy Williams observes, incumbents often reach out to lobbyists in order to finance their re-elections. Many use their voting record to demonstrate their commitment to the cause.

Not surprisingly, given the intense political polarization sweeping the United States, voting records correlated even more closely with party than dollars received. Ten of eleven Republicans voted with dirty energy 100 percent of the time, and the eleventh did so 58 percent of the time. Of the sixteen Democrats, thirteen voted against dirty energy every time, two did more than 90 percent of the time, and the last did 75 percent of the time.

The dirty-energy political money we’ve documented here is the tip of the iceberg. Our figures ignore the millions that companies and their owners give to lobbyists, PACs, and Super-PACs. It ignores contributions to state and local races and on ballot measures (such as this cynical and anti-democratic one). But even without a full view of the ledger, the conclusion is troubling: Big Coal and Big Oil have spent almost $5 million on campaign contributions to the current US Congressional Delegation from Cascadia, a region that prides itself as an emerging leader in the clean-energy economy.

Sources and notes: Data from the Center for Responsive Politics with additional analysis by Oil Change International. Throughout the article and in all figures, the contributions reported are total receipts since 1999 of the Northwest’s current Congressional delegation, including both US Senators and Representatives. No data were available for Rep. Susan Bonamici (D-Oregon), who only recently took the seat vacated by David Wu when he resigned in August 2011. One of the main contributors to politicians of both parties in all states was the National Rural Electric Cooperative Association. In much of the United States, rural electric coops support fossil energy. In Cascadia, however, they use primarily hydropower and have a mixed lobbying stance on fossil fuels. We therefore removed NRECA from the data set.

Guest contributor Japhet Koteen is a community builder, urbanist, and real-estate developer in Seattle.

Sightline Institute researches the best practices in public policy for a sustainable Pacific Northwest. Read more at daily.sightline.org.

It’s not the trillions elected leaders are looking for today in Washington, DC, but I know where they can find $77 billion: outdated subsidies to the oil and gas industries.

Oil and gas are two of the largest, most profitable industries in history. Yesterday, the big five oil companies, ExxonMobil, BP, ConocoPhillips, Chevron, and Shell posted combined profits of over $35 billion for the year to date. Yet US law treats them like fledgling businesses in need of public support. Ending their preferential treatment could trim the federal debt by tens of billions of dollars over the next five years. Here’s how:

1.) End the “Volumetric Ethanol Excise Tax Credit” — The VEETC gives refiners 45 cents for each gallon of ethanol blended with gasoline. Because US ethanol is mostly made of corn, this subsidy drives up food prices. Clipping the VEETC would put $31 billion in the US Treasury (over five years, as in each figure in this article).

2.) Fix the Accounting Rule for “Intangible Drilling Costs” — Since 1918, a bizarre and illogical accounting exception has persisted in the tax code, allowing oil companies to include all expenditures incidental to drilling a well as “current expenses” rather than “capital expenses.” This elementary accounting mistake, canonized in law, makes all the difference at tax time: Congress’ Joint Committee on Taxation says ending this handout would supply the Treasury $9 billion.

3.) Correct Errors in “Oil and Gas Royalty Relief” — Oil and gas companies that drill on public lands, whether onshore or off, pay royalties for the fuel they remove, but the Deepwater Royalty Relief Act of 1995 mandated royalty-free extraction when market prices are in the basement. Clerical errors—or corruption?—at the famously mismanaged (and subsequently abolished) Minerals Management Service of the US Department of Interior left a batch of 1998 and 1999 contracts written to exempt drillers from royalties at all prices. The result has been a windfall for holders of those leases. Fixing the contracts would yield almost $7 billion for the Treasury.

4.) Stop “Expensing” Refining Equipment –The Energy Policy Act of 2005 let companies deduct as expenses half the capital cost of investing in certain equipment used to refine liquid fuels. As for drillers’ Intangible Drilling Costs (see #2) so for refiners, “expensing” capital costs dramatically lowers tax bills. The Energy Reform Act of 2008, extended this credit to include refineries that are processing fuel derived from oil shale. The Joint Committee on Taxation estimates that putting a halt to this accounting lie would direct $2.3 billion into public coffers.

5.) Deep Six the “Geological and Geophysical Costs Tax Credit” — Included in the Energy Policy Act of 2005 and modified in the Tax Increase Prevention and Reconciliation Act of 2005, this credit gives extractors a handout for their spending on the search for oil and gas deposits. Ending this subsidy would yield for the treasury about $700 million, according to the Joint Committee on Taxation.

Beyond these subsidies that specifically favor oil and gas are others, general business tax rules that allow energy companies to avoid paying their fair share of taxes:

6.) Bar “Last In, First Out (LIFO) Accounting” for oil and gas — LIFO permits oil companies to tally each barrel sold as though they had bought it at today’s price, even if they bought it for half as much. That rule understates their profits and slashes their tax bill. For example, if a company bought a barrel of crude 2 years ago at $35, and bought another last year at $75, then sold both barrels at today’s price of $100.  The actual profit would be $90, but under LIFO they can claim that both barrels cost $75 to buy, so their taxable profit is only $50. (More details here.) Barring LIFO would augment the Treasury by $11 billion from the oil and gas industries alone.

7.) Cut off the “Foreign Tax Credit” — The US tax code allows multinational companies to receive a 100 percent credit on their US taxes for foreign taxes paid. Many of the payments made to foreign government are not taxes, but rather royalties or access fees. These are a legitimate cost of doing business, which should be deducted from their income, but should not be eligible for the 100 percent credit. Requiring oil companies operating overseas to honestly report royalty and lease payments would add $5.2 billion to the Treasury.

8.) Stop abuse of the “Domestic Manufacturing Tax Deduction” – Designed to slow the offshoring of US manufacturing jobs, this law allows companies to deduct 9 percent of their income as an expense of doing business in this country. But oil and gas fields cannot move, so the Domestic Manufacturing Tax Deduction shouldn’t apply. Excluding them from the deduction would direct $6.2 billion to public coffers.

Ending a raft of other handouts in the tax code like the “Passive Loss Exemption”, and allowing “Expensing of Tertiary Injectants,” boosts the total savings to $77 billion over 5 years. Learn more about them here and here.

One other upside to this deficit-reduction strategy: it will won’t cut jobs or hurt consumers. Because the annual subsidies are only a tiny fraction of the profits, and have no effect on gas prices.

Again, the trillions of dollars of deficit and debt that Washington, DC, is currently debating won’t be wiped out by a measly $77 billion. But, you know, $77 billion here . . . $77 billion there . . . pretty soon, you’re talking real money.

Source for subsidies: “Subsidy Gusher: Taxpayers Stuck With Massive Subsidies While Oil and Gas Profits Soar,” prepared by Taxpayers for Common Sense, May 2011.

Sightline Institute researches the best practices in public policy for a sustainable Pacific Northwest. Read more at daily.sightline.org.