Posts Tagged Treasury

Superfund Taxes

Posted by on Sunday, 4 April, 2010

The Treasury recommends additional environmental tax increases in the Green Book. Superfund charges will be restored according to this proposal. Here is an explanation about how the Superfund taxes are calculated and which industries are being taxed.

Superfund sites are large environmental cleanup areas where the government sends out workers to mitigate environmental damage. One major Superfund site is located in Glendale, CA and involves chromium cleanup, according to the EPA. Surprisingly enough, the tax surcharges on several items stopped in 1996, according to the Treasury Green Book. The latest proposal returns tax charges for items such as imported oil and other petroleum, as well as certain toxic chemicals. The tax changes are relatively minor compared to the cost of a barrel of oil, as a tax of slightly less than ten cents is not material compared to an eighty dollar oil barrel of crude, although this is still a tax increase that will likely be passed on at the pump. More significant, the corporate environmental income tax may be restored according to this proposal. This 0.12% tax appears to be applied to all corporations above the income threshold, not just the ones that caused the damage to the Superfund sites, according to the Treasury recommendation in the Green Book. Both of these tax increases would last a decade and sunset at the end of 2020.

The provides information on the original distribution of these taxes. Apparently the fixed rates present before 1996 haven’t changed. Because of inflation, charges such as the ten cents a barrel oil tax would make up less of the revenue collected, and percentage based taxes such as the corporate environmental income tax would make up more of the revenue. The corporate environmental income tax originally produced more revenue than the petroleum tax according to Open Market. It appears that finance and insurance corporations may end up paying higher amounts because of this proposed tax increase than the oil companies and other petroleum industries. The original data given at the NCSE site is from 1993, when the FIRE industry was a much smaller proportion of the economy than it is now, and the FIRE industries listed paid around 27% of the Superfund tax.

Carbon Tax: Sequestration and Tertiary Extraction

Posted by on Sunday, 4 April, 2010

To deal with climate change, it is necessary to trap carbon produced in manufacturing. Clean energy production is not ramping up quickly enough to reduce the carbon present in the atmosphere. So the IRS has created carbon sequestration credits to provide a tax break for manufacturers who trap carbon, and the Treasury proposed removing tax benefits for oil and gas production.

According to the IRS, it is possible to gain a tax credit for carbon sequestration. The credit is twice as high, twenty dollars a metric ton, if the carbon is not used to extract natural gas or oil once captured. A manufacturer can still receive ten dollars per metric ton if the carbon is used to extract petroleum fuels. This suggests that the carbon sequestration credit could be used to support additional petroleum exploration that releases carbon into the atmosphere, especially if the oil company offers more than the difference of ten dollars a metric ton for the carbon dioxide so it can be used in tertiary extraction.

Injecting the carbon dioxide into an oil field releases oil or gas that is difficult to extract through other means, so it is called a tertiary injectant as it is injected after other methods are used. According to the Treasury Green Book, the tertiary injection deduction may be repealed in 2011. A related policy, the enhanced oil recovery credit, is also suggested for repeal. This is part of energy legislation that removes other tax incentives for the oil and gas industry, such as tax deductions for drilling in marginal wells, in addition to changing how depletion and oil well drilling costs are reported. Coal extraction deductions for US manufacturing are also removed in this proposal. The overall effect of the energy legislation removes subsidies to natural gas and oil companies, so that their products are less cost competitive with renewable energy. This is an alternative to cap and trade, as it changes tax rules rather than creating a carbon futures exchange.