California lawmakers call to eliminate oil and gas industry subsidies, tax benefits as state moves to finalize cuts to climate programs

Lawmaker letter endorses request from more than 50 organizations urging Gov. Newsom and the legislature to review and eliminate oil and gas industry tax benefits in light of record profits, funding shortfalls

SACRAMENTO — A group of lawmakers from across California are calling for Governor Newsom and legislative leaders to review and eliminate oil and gas industry subsidies and tax benefits, as the state finalizes a budget that cuts critical climate funding for communities. The bicameral letter highlights how California’s biggest polluters benefit from billions of dollars in tax breaks while continuing to reap record-breaking profits, even as the state experiences a budget shortfall forcing a $6 billion cut to the state’s $54 billion climate commitment made last year. 

“While we took action to hold Big Oil accountable in this year’s Special Session, the oil industry continues to receive tax benefits from the state every year,” said Senator Josh Becker (D-Menlo Park). “While ending these subsidies won’t solve our budget deficit alone, we must put every option on the table to ensure California is delivering on our commitment to move away from fossil fuels.”

“We’re allowing for fossil fuel corporations to rake in huge tax breaks while we’re slashing programs that will transition California to a just, clean future,” said Senator Lena Gonzalez (D-Long Beach). “This change could bring back millions in subsidies California provides to fossil fuel companies through tax breaks.”

“Fossil fuel companies pursue a business model that is harming our planet, yet California still gives them millions of dollars in tax breaks,” said Senator Ben Allen (D-Santa Monica). “In this budget-deficit year especially, it’s time to change course on these tax subsidies and start protecting our investments in the environment.”

In the letter, lawmakers argue that the state should protect and prioritize climate investments as Californians continue to suffer from extreme weather and other climate change impacts — noting that cutting tax benefits to polluters could help restore much-needed funding for community resilience and climate mitigation. 

The letter requests that the Administration estimate the value and eliminate various tax benefitting the oil and gas industry, including Water’s Edge Election which is a tax utilized in most states which allows businesses to exclude income and factors of non-US affiliates when calculating their income in California. The current Water’s Edge exemption includes a tax benefit for multinational companies—including oil and gas companies. 

The letter from lawmakers garnered the following responses from advocates: 

“The time for subsidizing oil and gas companies must come to an end,” said Laura Deehan, State Director for Environment California. “California should instead invest in renewable energy infrastructure and address the antiquated, fossil fuel-based systems left behind, as well as the polluters’ unwillingness to clean up their own mess.”

“The fact that California is subsidizing the fossil fuel industry with our state budget is unconscionable in a moment when they are at the very center of the cause of the climate crisis,” said Melissa Romero, Senior Legislative Manager, California Environmental Voters. “If our state truly prioritizes climate action, we must end fossil fuel subsidies in California’s budget and address the biggest crisis in our lifetimes directly.”

“California’s climate leadership depends on investment in our people and the planet we share. There is no reason to continue subsidizing the corporations polluting our air, water, and climate to the tune of billions of dollars,” said Nicole Rivera, Government Affairs Director, The Climate Center. “We’re proud to join climate champions in the Legislature in urging Governor Newsom and state leaders to eliminate tax breaks for oil and gas corporations.”

“California has an opportunity to take another important step to end our dependence on fossil fuels and continue our national climate leadership,” said Arnold Sowell Jr., Executive Director for NextGen California. “Our state’s climate goals necessitate a fully climate-aligned budget – a budget that puts the full force of each taxpayer dollar behind protecting communities from climate change. Let’s address the climate crisis with the urgency required and end the billions of dollars in subsidies and tax breaks that benefit California’s biggest polluters – oil and gas companies.”

For more information, please contact Sage Welch, [email protected]. 

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