Currently the Canadian taxpayer is losing over $1.7 billion each year through gas subsidies to tar sands producers, including Koch Industries.
The provincial royalty rate varies with the price of oil. At the current world price of approximately $87/barrel, the rate is 32.38%. Since natural gas costs can be deducted directly from the royalty payment, the companies recover 32.38¢ from every dollar spent on natural gas.
A more disturbing aspect is that the royalty payments are significantly reduced (by about 85%) for these Tar Sands companies until they have paid off their full capital and interest costs. This may never happen, as the companies will continually need to inject more capital upgrades to the operations.
These companies also double-dip on the taxpayer. Not only do gas costs come off the royalty payments, they are also a deduction on the 28% federal and provincial income tax they must pay. In other words, they get to deduct their gas costs twice so that the Canadian taxpayer is currently paying for 51.31% of the over one million cubic feet of natural gas consumed every day heating the bitumen.
This is rather like a husband who claims all the tax deductions and credits, including those for his wife, on his income tax, while the wife does exactly the same thing on hers, and they both receive the child tax benefit. Any Canadian family trying to do this will probably get a nasty, threatening letter from Revenue Canada.
There is also the possibility that many of these companies can engage in a legal form of money laundering. If they also extract their own natural gas through one subsidiary, they can sell it to their tar sands subsidiary for whatever price they choose, artificially raising profits at one end and deductions at the other end.
Koch Industries, the Tar Sands and the Tea Party
Koch Industries, with an estimated annual income of $100 billion, has a major stake in the Alberta Tar Sands, and like the other producers up there, takes full advantage on the government subsidies on natural gas. Their assets also include major oil refineries in the US, designed specifically to refine the super heavy crude piped down from the tar sands.
If Tar Sands “oil” quit flowing, these refineries would sit idle. As an example, the Pine Bend Refinery, owned by Koch, was built specially to process the heavy crude from the Tar Sands. This Minnesota refinery also connects to Wisconsin, and provides 40% of that state’s gasoline and diesel. One reason that Alberta will never have any significant Tar Sands refinery capacity is that Big Oil needs to prove to the Administration and the US voter that they are good “corporate citizens” by creating as many American jobs as possible, at the expense of Canadians.
Wisconsin attempted to introduce a “Clean Energy Jobs Act” with a low-carbon fuel standard. It would have encouraged the use of regular crude, rather than the high-carbon crude from the tar sands. This act could potentially have a negative impact on the Koch refinery. Koch and its affiliates lobbied hard to get the low-carbon standard removed from this act.
A Koch subsidiary also gave $1 million towards passing California’s Proposition 23.
(Such legislation) would cripple refiners that rely on heavy crude feedstocks to provide the transportation fuels that keep America moving, according to a Koch Website.
It would be particularly devastating for refiners that use heavy Canadian crude oil because the policy seeks to discourage or even prevent the U.S. from benefiting from this essential, reliable resource.
According to The Guardian, “The company has had to pay tens of millions of dollars in fines and settlements for oil and chemical spills and other industrial accidents. The Kochs want to pay less tax, keep more profits and be restrained by less regulation. Their challenge has been to persuade the people harmed by this agenda that it’s good for them.”
Renewable Energy Potentially Harmful to Big Oil
Prior to the midterms, the Obama Administration had not produced any clear sustainable energy policy, which allowed China to take the lead. However, such a policy was definitely on the horizon. The goal of the oil companies, therefore, was to insert enough of their own people to cripple the administration as it sought to create a sane energy policy.
A country’s political system is not controlled by the voters, but by the people and organisations who bankroll the political parties, whether Democratic, Republican or Tea Party. This is the reason Koch Industries created the Tea Party and financed Sarah Palin as its “Leader,” in part with its Canadian subsidies. Big Oil, both in the US and elsewhere, has a huge financial stake in holding back any kind of sustainable energy development, which would gradually lower the demand for oil and other fossil fuels, and lead to lower profits for the oil companies.