Energy innovation has driven America’s growth since before the thirteen colonies became the United States of America.
From land grants for timber and coal in the 1800’s to tax expenditures for oil and gas in the early 20th century, from federal investment in hydroelectric power to research & development funding for nuclear end today’s incentives for alternative energy sources, America’s support for energy innovation has helped drive our country’s growth for more than 200 years.
Tariff Act of 1789: Provided a protective tariff for coal which gave a tremendous cost advantage to domestic producers over British competitors. This tariff, coupled with favorable tax treatment during the Korean War, remains in effect today.
Preemption Act of 1841: Allowed individuals to acquire federal land & claim it as property. To preserve ownership, an individual had to be living on the federal land or had to be consistently working to improve the land. If the granted land sat idle for 6 months or more, the Federal Government could seize the land. Land was purchased at no less than $1.25/acre and fueled Manifest Destiny – The belief that American settlers were destined to expand throughout the continent.
Homestead Act of 1862: Provided an applicant ownership of land (typically called a “homestead”) at little or no cost. Land granted was unappropriated federal land (usually 160 acres). Land was granted to a US citizen willing to settle on and farm the land for 5 years.
Timber Culture Act of 1873 – Granted up to 160 acres of federal land to a homesteader who would plant at least 40 acres of trees over a period of several years. Land could be added to existing homestead claims, offering a total of 320 acres to a settler.
Timber & Stone Act of 1878 – Enabled the sale of western timberland for $2.50/acre in 160 acre blocks. This land was deemed unfit for farming and was sold to those who wanted to “timber and stone” upon the land. Wealthy companies hired individuals to purchase 160 acre tracts which were then deeded to the company after nominal legal compliance. Said companies were able to obtain title for up to 20,000 acres of federal land.
During the Bush-Cheney Administration, the Halliburton loophole, named after the company that patented an early version of hydraulic fracturing, was passed exempting the oil and gas industry from the Safe Drinking Water Act. Further, manufacturers and operators are not required to disclose all the ingredients used for fracking on the principle that trade secrets might be revealed. While oil and gas companies do not have to divulge the chemicals used for deep underground extraction, companies must pump in vast quantities of water and sand, under enough pressure to fracture rock and release the gas trapped inside. In the slurry that comes back up as waste water: toxic chemicals, including some that cause cancer, damage the nervous system, disrupt hormones and mutate genes. The rapid expansion of fracking over the last five years has resulted in confirmed cases of drinking water contamination, a house explosion, and air pollution.
Favorable tax treatment that Oil & Natural Gas receives dates back to 1916. More than $12B would have come from eliminating a domestic manufacturing tax credit for big oil and $6B would have been generated by ending deductions for taxes paid to foreign governments.
During first 15-years of production expansion: Nuclear subsidies comprised more than 1% of the normalized federal budget while Oil & Natural Gas Subsidies equated to more than 1/2 of 1% of the normalized federal budget. Conversely, Renewable Subsidies only comprised 1/10 of 1% of the normalized federal budget.
Nuclear Power – Could NOT exist without federal indemnification in case of accident.
In other words, nuclear subsidies were more than 10x greater than that of renewables and Oil & Natural Gas subsidies were 5x greater than those received by the alternative energy sector.
Historically, policymakers have justified intervention in energy markets: