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Budget hawks: Does US need to give gas and oil companies $41 billion a year?

As President Obama and Congress look for budget cuts, some experts say federal energy subsidies are ripe for trimming. Among oil companies, nuclear power, and coal, who gets what from US taxpayers?

By Staff writer / March 9, 2011

The full moon sets behind a wind farm in the Mojave Desert in California in this Jan. 8, 2004, file photo. President Obama is urging Congress to eliminate billions of dollars in subsidies for oil companies.

Toby Melville/Reuters/File

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Desperately seeking fiscal savings, Congress and President Obama are scrambling to find anything in the federal budget that can be thrown overboard, from child nutrition aid to funding for military bands.

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But the American people might be on to something. In a poll conducted for NBC and the Wall Street Journal, three-quarters of respondents favored "eliminating tax credits for the oil and gas industries." Specifically, 47 percent said they found such cuts "totally acceptable" and 27 percent said they found it "mostly acceptable."

To some budget hawks cutting subsidies to mature and profitable energy industries is an inevitable part of any budget deficit solution. "Clearly most of the attention has been focused on non-security discretionary budget,” says Steve Ellis, vice president of Taxpayers for Common Sense in Washington. “But even if we eliminated every dime of that, we would still have a trillion-dollar deficit. So these issues like subsidies for the oil and gas industry – and the tax code – are going to have to be tackled."

Finding and tallying federal energy subsidies, however, can be fiendishly difficult. Doug Koplow of the energy-consulting firm Earth Track in Cambridge, Mass., is considered one of the nation’s leading experts on the topic.

He estimates that the US spent between $49 billion and $100 billion on energy subsidies in 2007 – numbers Mr. Koplow says are still accurate if adjusted for inflation. The handouts cover a broad range of activities, from federal loan guarantees and funding for energy research and development to special tax exemptions.

Here is how the subsidies break down by category, adjusted for inflation, according to Koplow.

Oil and gas: $41 billion

President Obama wants Congress to chop $3.6 billion in 2012 oil and gas tax breaks for a total of $46.2 billion over the next decade. Among Mr. Obama’s targets: a nearly century-old oil and gas industry tax deduction for the costs of preparing drill sites and a manufacturer's tax break granted the oil industry in 2004.

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