Yes. Cruz is a Hypocrite When it Comes to the RFS and Big Oil

Photo by Dave Davidson –

Senator Ted Cruz’s presidential campaign is demanding that a radio ad being run by America’s Renewable Future be taken down because he says it’s inaccurate.

The ad, entitled “Hypocrite,” states “Politicians like Ted Cruz support subsidies for big oil, but want to end support for ethanol.” Rick Tyler, Cruz’s national spokesman, told the Des Moines Register on Tuesday, “It is blatantly false to suggest that Sen. Cruz wants to end the Renewable Fuels Standard while maintaining subsidies for oil. Cruz has repeatedly stated that he would end all energy-specific subsidies, both ethanol and oil among others.”

Blatantly false? Hardly.

While it’s true that Cruz has been consistent in his opposition to the Renewable Fuels Standard (RFS), a policy that sets the minimum amount of renewable fuels that are required to be sold in the United States, it’s the Senator’s claim that he also supports cutting off subsidies to the oil industry that doesn’t stand up to scrutiny.

Cruz was directly asked about how, in one breath he can oppose the RFS, but in the next, advocates for subsidies for the oil and gas industry. Cruz was confronted at the Iowa GOP’s Growth and Opportunity event on October 31st at the Iowa State Fairgrounds. Once again, Cruz clearly stated his position that all subsidies should be eliminated.

Cruz added, however, “When it comes to picking winners and losers, we also shouldn’t pick losers. A lot of what are called subsidies in the oil and gas industry are analogous to ordinary business deductions that every other industry gets.

Cruz was specifically asked about the Intangible Drilling Cost deduction that allows the oil and gas industry to immediately deduct the cost of preparing and drilling a new well. This special tax deduction includes everything from wages, supplies, and fuel, to site preparation. In total, it can account for over two-thirds of the cost of a new oil or gas well.

The ability to immediately deduct those expenses is a huge tax advantage that other non-oil and gas companies don’t receive. Non-oil and gas companies are only allowed depreciate capital expenses over a period of time based on the type of asset. Non-oil and gas companies are also capped on how much they can deduct, which is not the case for the oil and gas industry that has no limit on how much it can immediately deduct.

This preferential tax treatment that only the gas and oil industry receives will cost taxpayers $13.7 billion over the next ten years according to the Joint Committee on Taxation. And that’s just one of seven special subsidies the oil and gas industry receives. Taxpayers for Commonsense estimates that if subsidies for just the oil and gas industry were eliminated, taxpayers would save at least $65 billion over the next ten years.

Cruz has often referred to the RFS as a “subsidy,” but it is not. While it is a mandate on the oil industry to blend a certain amount of fuel with renewable alternatives like ethanol, it doesn’t cost federal taxpayers or the federal government a dime.

So, is Cruz a hypocrite for supporting over $65 billion in tax incentives for the gas and oil industry for the next ten years while at the same time advocating against a policy that encourages the use of a domestic fuel that’s cleaner for the environment that also doesn’t cost taxpayers anything?

Yes, clearly Cruz has a double standard.

It’s also somewhat ironic to listen to Cruz put a new twist on the argument that the government shouldn’t be picking winners or losers. In this case, he is talking about how the government should not take away something from the oil and gas industry. Ironically, this week the EPA implemented an administrative rule that subverted a law passed by Congress when it lowered the percentage of renewable fuels being blended from 15 to 10 percent.

The EPA and the Obama administration seem to be picking the oil and gas industry as a winner while Iowa farmers and the renewable fuels industry are the big losers. On this issue, Senator Cruz is standing shoulder to shoulder with President Obama, the EPA, and his home state’s special interests.