US Congress allows oil spill tax to expire

  • Market: Crude oil, Oil products
  • 09/01/19

A US government trust fund used to clean up oil spills is losing out on millions of dollars in revenue after lawmakers allowed a 9¢/bl excise tax on refiners, importers and producers to expire at the end of last year.

The tax is the main source of revenue for the Oil Spill Liability Trust Fund, which was created in the wake of the 1989 Exxon Valdez disaster as a way to ensure the timely clean-up of oil spills. The tax applies to crude received at US refineries, imports of petroleum products and domestically produced crude that is exported.

But the US Congress allowed the tax to expire on 31 December, saving refiners and importers that would otherwise pay into the fund more than $1.5mn/d in taxes, based on recent refinery runs and import levels.

"Suspending the tax is a tax giveaway to the oil industry by this Congress and administration," said Rick Steiner, a retired professor at the University of Alaska and board member for the non-profit group Public Employees for Environmental Responsibility.

Congress similarly allowed the excise tax to expire at the end of 2017, creating a two-month gap in the tax's collection before it was reinstated on 1 March 2018 through a bipartisan budget law. It remains unclear how long it might take for lawmakers to reinstate the tax. A Democratic bill to reopen the government does not include an extension of the tax.

Tax experts say it is unlikely that Congress would make the oil spill excise tax retroactive, given that refiners and importers usually pass on the tax to their customers.

"I think it would be very, very unlikely to happen, especially based on the precedent last time," KPMG federal excise tax practice managing director Deborah Gordon said.

Environmental groups have pushed to broaden the excise tax so it applies to oil sands, which is now exempt from the tax, and to cargo ships, which are covered by the fund but do not pay the tax. The trust fund had a balance of $6.7bn as of the end of last year, up from $900mn nearly a decade ago, according to budget documents.

The US Coast Guard, which administers the fund, did not respond for comment.


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