Oil, Gas, and Coal

Tax subsidies for oil, gas and coal energy include the following items:

  • Credit for investment in clean coal facilities
  • Exclusion of special benefits for disabled coal miners
  • Exception from passive loss limitation for working interests in oil and gas properties
  • Capital gains treatment of coal royalties

The most significant source of tax support for hydrocarbon energy is the credit for investment in “clean coal” facilities, which provides a 20-percent investment tax credit for eligible coal gasification technologies. The credit was created by the Energy Policy Act of 2005, which states that the credit may only be made available to projects certified by the Secretary of Energy after a competitive bidding process.  To obtain the certification, eligible plants must reduce SO2 and mercury emissions below a certain level. From Fiscal Year 2009-2012, the credit amounted to $1.17 billion in federal revenue losses.

Overall, for Fiscal Years 2009 through 2012, oil, gas, and coal accounted for the smallest portion of federal energy subsidies of the five categories.  For this time period, oil, gas, and coal accounted for 2 percent of total tax subsidies for energy.