As the congressional supercommittee continues to struggle towards an agreement on cutting $1.5 trillion over a decade from the national budget, cutting government handouts to the oil industry is an obvious and oft repeated target for the chopping block. Public support for removing subsidies to the oil industry remains overwhelmingly positive

Even John Boehner and Paul Ryan have voiced support for the idea — even if they were later reminded of their obligations and silenced by their oily campaign donors.

Democrats though, can’t seem to decide if they’re serious about ending all these subsidies, or if they’re just interested in scoring political points by bashing Big Oil. This lack of clarity is rewarding their political opponents, confusing and undermining their base of support, and minimizing their chances of policy and political success.

President Obama has proposed cutting roughly $40 billion over 10 years in subsidies to the oil, gas, and coal industries in every budget he’s submitted to Congress since taking office. While these are not all the subsidies that these mature and very profitable industries enjoy, they are some of the most obvious.

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The president has consistently and clearly stated that the reasons for ending these subsidies range from deficit reduction to minimizing oil dependence and climate change. In short, the president’s proposal is a good potential first step towards fiscal and energy policy sanity.

Last month, House Democrats led by Reps. Welch and Blumenauer, went another step further, sending a letter to the supercommittee that called for eliminating $122 billion in subsidies for oil, coal, and gas over 10 years. This is a much more comprehensive ask, and would in fact begin to level the playing field for clean energy while saving nearly 10 percent of the overall goal for the supercommittee.

The House Democratic position is also supported by a majority of all Americans, according to a new poll by the non-partisan Civil Society Institute.

Then there’s the Senate. Sen. Robert Menendez of New Jersey recently led a letter that was sent by 13 of his colleagues to the supercommittee. The letter urged the committee to consider the Close Big Oil Tax loopholes act that Menendez sponsored earlier this year. That bill, which gained majority support but needed 60 to pass, would have eliminated only $21 billion over 1- years in subsidies to only the Big Five oil companies — Exxon, Chevron, ConocoPhillips, Shell, and BP.

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This is the kind of a compromise that only could happen in the Senate — and that the supercommittee is supposed to avoid. It isn’t actually a serious proposal for subsidy reform, more like a public relations move designed to give the appearance of a win.

If the supercommittee ends up eliminating only subsidies to the Big Five oil companies in exchange for well, anything, it will be a terrible deal.

The Senate bill or any deal based on it would leave intact subsidies to some of the biggest and most profitable oil and gas companies. These include Koch Industries, Valero, Occidental, Anadarko, TransCanada, and Chesapeake Energy — to name just a few. These are not “Mom and Pop” companies. For example, Occidental’s Ray Irani was the highest paid energy CEO in the world, pulling down $76.1 million last year.

The push to exempt the so-called “independent” oil and gas producers comes from the Independent Petroleum Association of America (IPAA), which claims that its members would be disproportionately affected by the subsidy reforms proposed by President Obama. The IPAA was also, not coincidentally, a top oil and gas industry donor to the House members of the supercommittee in the third quarter of this year.

Earlier this year, Oil Change International took a look at just who some of these so called independents are. While the IPAA membership list is not publicly available, our research has revealed the following about the U.S independent upstream oil and gas sector. We looked at EIA data on the top 100 oil producers by reserves and found 86 publicly listed independent oil producers.

  • The top five independent companies by market capitalization are Apache, Anadarko, Devon, EOG, and Talisman, which between them are worth over $178 billion.
  • Some “independent” companies are not so independent. Aera Energy LLC is a privately held company that is among California’s biggest producers. Shell and ExxonMobil jointly own it. Some companies are not owned by other oil and gas companies but instead by multinational holding companies. One such example is Fidelity Exploration and Production Company, which is owned by MDU Resources, a company with a $4.4 billion market capitalization. Others are multi-billion dollar enterprises that are registered in tax havens, which may be dodging the U.S. tax system altogether. One such company with significant U.S. oil reserves is Energy XXI, registered in Bermuda.

The fact is that the U.S. oil industry is enjoying a grand resurgence. The big growth is happening in places like the Bakken Shale in North Dakota. The Energy Information Administration (EIA) states that production of shale oil in the Bakken formation rose from 3000 b/d in 2005 to 225,000 b/d in 2010. PFC Energy expects it to rise to 450,000 b/d by 2013.

Bakken oil producers, almost all of whom are independents, are making tons of cash. The International Energy Agency recently stated that:

High oil prices have been a key driver of [U.S. shale oil] growth, given that the breakeven oil price for a typical light tight oil development is around $50/barrel (including royalty payments).

Therefore one of the key areas of production for many independents, and the most significant in terms of growth prospects in the coming decade is a steal at current oil prices. The EIA expects oil prices to remain above $100 a barrel for the next few years and currently forecasts an average oil price of $114 a barrel in 2012.

So do any oil & gas companies really need government help?  I think not.