A new report from nonprofit The Climate Center has unearthed historical documents that show the big oil companies orchestrated a tax break that allows them to avoid paying an estimated $75 million to $146 million a year.
The California Legislature adopted the so-called "Water's Edge" tax policy in 1986.
Barry Vesser, chief operating officer with The Climate Center, said it allows companies to decide which of their earnings are taxable in California, and exclude those linked to operations elsewhere, thus dramatically reducing what they owe in taxes.
"The report shows is that companies like Chevron and Shell and Exxon, back in the '70s and '80s, worked really hard to get this exemption into the tax code, in spite of the fact that lots of advocates and many people in government were saying that this is a bad idea, including the head of the Franchise Tax Board at the time," Vesser explained.
The report estimates that "Water's Edge" costs California about $4 billion a year across all industries. The oil companies argue that it is unfair for a state to tax their global earnings. However, oil-rich Alaska prohibits this type of tax exemption.
Climate advocates are pressing California lawmakers to end all subsidies for these companies in budget negotiations this spring. Vesser noted that last year, California's budget cut billions from climate programs to help fill a $46 billion deficit. Meanwhile, Chevron, Shell and Exxon reported $83 billion in profits in 2023.
"Oil and gas companies spent $31.4 million in 2024," he continued. "They broke a record even in the first three-quarters of all-time spending at the California State Legislature. So, these companies are working to undermine sensible public policy outcomes."
Assemblymember Damon Conolly, D-San Rafael, said in a statement that eliminating the Water's Edge tax break for multinational oil and gas corporations is a common-sense solution to make polluting industries pay their fair share to fix the environmental and health problems they helped create.
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South Dakota lawmakers begin a new legislative session today and are already hearing from worried landowners about their rights as a private company keeps pursuing a large-scale carbon capture project.
A coalition rallied Monday, calling on the Legislature to adopt a bill to ban the use of eminent domain for any pipeline project involving carbon dioxide. Summit Carbon solutions has been trying to secure permits from regulators and permission from landowners to build a multistate pipeline carrying emissions from ethanol plants.
Amanda Radke, a rancher and landowner rights advocate from Mitchell, said after progress last year, they want the state to cement protections.
"This in no way would stop a CO2 pipeline from going through," Radke pointed out. "It would just ensure that landowners have consent and the ability to say yes or no to a project and that's really all we want."
In trying to clear regulatory hurdles, Summit has encountered resistance from some landowners who do not want the pipeline running along their property. The state Supreme Court recently decided Summit does not have the legal grounds to forcefully take property for the route. Voters last fall repealed a law deemed favorable to the project. Summit has staunchly defended its actions, while touting the benefits of the planned pipeline.
The company said the pipeline would add jobs along with emissions reductions. However, environmental groups are skeptical about some of the claims. And Radke added for landowners like her, a carbon capture project close to her home adds another level of worry.
"It could be potentially very dangerous if there was a rupture or a leak of a colorless, odorless gas," Radke pointed out.
Summit said there are a number of ways in which communities will be protected, including a control center featuring the latest in leak-detection technologies.
Meanwhile, on Wednesday, South Dakota regulators will begin a series of public hearings on a new permit for the project, after rejecting Summit's initial application. The company has seen recent permit wins in neighboring states.
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By Kari Lydersen for Energy News Network.
Broadcast version by Terri Dee for Illinois News Connection reporting for the Solutions Journalism Network-Public News Service Collaboration
The last time President Donald Trump took office, Illinois had just passed the Future Energy Jobs Act (FEJA), creating an ambitious renewable electricity mandate, solar incentive programs, green job training and equity provisions to propel the state’s clean energy economy.
That progress is offering both a blueprint and a source of hope for Illinois clean energy and environmental justice advocates as they try to keep the state’s clean energy transition on track during a second Trump presidency.
“The state policy is designed to be responsive to a lack of federal climate leadership, to the need for Illinois to step up into a position of climate leadership,” said Vote Solar deputy Midwest program director John Delurey, who added that since the 2024 election “I’m at the point where I can channel my existential dread into state-based action.”
Illinois lawmakers expanded on FEJA with the Climate & Equitable Jobs Act (CEJA) in 2021, and advocates expect another state energy bill in 2025 to prioritize energy storage and otherwise further clean energy goals, including planning for the mandatory closing of almost all fossil fuel generation by 2035.
“With CEJA we’ve mapped out an ambitious climate plan, and we’re in a strong position to further those goals even under a Trump administration,” said Madeline Semanisin, Midwest equitable building decarbonization advocate for the Natural Resources Defense Council. “This is not the first Trump administration. States and cities are more prepared this time to accelerate initiatives at the state and city level.”
That’s not to say the state won’t be affected by a president who is hostile toward clean energy policy. Several federal tax credits and grants that have helped accelerate progress in Illinois could be at risk under Trump, and a rollback of federal environmental regulations or enforcement could prolong pollution from coal ash, power plants and other sources.
James Gignac, Union of Concerned Scientists lead Midwest senior policy manager for the Climate & Energy program, said he thinks of the state’s clean energy outlook in terms of headwinds and tailwinds, which will continue to shift based on economic and political factors beyond the state’s control.
“States for many years have not been able to rely on the federal government for climate action, whether due to politics or the Supreme Court,” Gignac said. “The election results will make it harder to achieve the goals that Illinois has established. It doesn’t fundamentally change the energy policy path that the state is on, it just makes it even more urgent that state legislators pass additional policies.”
Tax credits and grants
Federal funds from the Inflation Reduction Act, Bipartisan Infrastructure Law and other federal programs have helped Illinois and individual cities and counties carry out their clean energy goals. Illinois was awarded more than $430 million in a Climate Pollution Reduction Grant for implementation of the state’s goals on industrial decarbonization, clean energy, clean transportation and freight, climate-smart agriculture, and building energy efficiency.
Illinois was also awarded $156 million in federal Solar for All funds to bolster solar and equity goals including workforce training, residential solar deployment, and community engagement.
Illinois advocates and experts said they expect federal funds that have already been awarded to be paid out, and they don’t expect the Trump administration and Republican-dominated Congress to make major changes to the IRA or infrastructure law, especially given the financial impact those laws have had in Republican-dominated areas.
“We have seen hundreds of thousands of dollars for small businesses and farmers” paid out through the federal Rural Energy for America Program (REAP), not to mention federal IRA funds, that “overall are benefitting Republican districts” during the Biden administration, noted Angela Xu, Illinois Environmental Council municipal engagement manager.
Even if new federal funding windfalls are not available in the future, advocates say the funds awarded during the Biden administration will have lasting impact, combined with state-level programs and funding sources that will continue, and market forces that are making clean energy increasingly competitive.
“President-elect Trump has indicated his intention to roll back IRA programs, but keep in mind that when President Trump was elected last time, he and the Republican-led Senate and House were hellbent publicly on rolling back Obamacare, and that didn’t happen,” said Environmental Law & Policy Center executive director Howard Learner.
“The IRA has supported smart, sensible renewable energy development in red states and blue and purple states,” he added. “There’s no question if President Trump tries to cut back and constrain the IRA, it will have some impact on the pace of renewable energy development and other climate change solutions. On the other hand, it’s very hard to keep better technology from growing. When new technologies come to the market and they are better and cleaner and economically sensible, they tend to accelerate and capture more market share.”
Illinois Shines, the program creating lucrative Renewable Energy Credits for distributed solar, is funded through ratepayer payments — so it is not dependent on federal funding. That doesn’t mean it is immune from federal action, since the federal Investment Tax Credit and the global solar market influence the viability of projects in Illinois.
“There are levers they can pull, through an act of Congress they can change the ITC, which is an important part of the value stack for renewables,” said Delurey, of Trump and his allies in Congress. “And they could deploy tariffs which make the landscape a lot more complicated. The U.S., thanks to the IRA, is making its way towards onshoring and bringing a lot of manufacturing back stateside, but we’re not quite there yet.”
If the tax credit is reduced or solar panels get more expensive because of tariffs, Illinois’s incentives “would probably have to be adjusted accordingly,” Delurey said, with bigger incentives for each project.
“It would just mean fewer megawatts and kilowatts in Illinois. We’d still be deploying solar, but it is sensitive to the price of clean energy.”
Environmental justice
Advocates agree that the Biden administration’s Justice 40 mandate, that 40% of the benefits of many federal climate and other programs go to disadvantaged communities, is likely to be ended or ignored by the Trump administration.
Lower-income and marginalized communities could also be affected by understaffing, delays or rollbacks in federal programs like LIHEAP, which provides energy bill assistance, and energy efficiency rebates for low-income households.
“We can put things in state legislation that supports these communities,” including in the Illinois energy bill being drafted for introduction in 2025, Semanisin said. “Justice 40 is a framework we can incorporate in state legislation as well, to prioritize people who have been historically underserved.”
During his first administration, Trump made significant rollbacks to coal plant wastewater protections, and to the 2015 federal rules governing the storage and cleanup of coal ash. Both are big issues in Illinois, where eight coal plants are still operating, and coal ash is stored in 76 ponds, landfills and other sites, according to an Earthjustice analysis.
Earthjustice senior attorney Jenny Cassel said experts anticipate Trump will again try to weaken the Clean Water Act and coal ash protections. Meanwhile it’s likely the EPA under his administration will do little to enforce the coal ash regulations, which was largely the case before the Biden administration made coal ash a priority.
Illinois passed its own state coal ash rules in 2019, after lobbying by activists who wanted to make sure the rules were at least as strong as federal rules and covered legacy ponds not included in federal rules at the time. In 2024, the federal rules were expanded to cover legacy ponds as well as historic ash and coal ash landfills, but that provision is being challenged in federal court. The state rules do not cover ash historically dumped or scattered around, and they also do not cover inactive coal ash landfills.
Meanwhile the implementation of the Illinois coal ash law has been extremely slow. The law requires each site to get an operating permit with pollution limits that can then be enforced, but so far only two permits at one coal plant site have been issued, Cassel said.
“We keep hearing excuse after excuse” from the Illinois EPA that issues the permits, Cassel said. “‘We don’t have enough people, they’re tied up in administrative hearings, conditions are changing,’ every dog-ate-my-homework excuse in the book.”
“At the federal level, there’s any number of potential ways they could attempt to roll back the [coal ash] rules, or weaken areas that haven’t been fully defined,” she added. “That’s certainly what they did in round one. Illinois will really have to step up into the vacuum of protectiveness we expect at the federal level.”
Local action
Chicago — site of the 2024 Democratic National Convention — has long been a target of Trump’s ire, and Chicago officials during his last administration and today are outspoken about countering Trump’s agenda.
Chief Sustainability Officer Angela Tovar said the city will continue its work on solar, electric vehicles and building decarbonization, as well as centering environmental justice in planning, zoning and enforcement decisions.
“So much of everyone’s local regulations hinge on things like the Clean Air Act and federal standards; there is going to be this question of federal preemption, what home-rule authority do we have?” Tovar said. “Those are still outstanding questions. Every rollback will present its own set of challenges for cities and states. What I am at least grateful for in being in the state of Illinois and the city of Chicago is we do have such robust climate leadership at the state and local level.”
The city’s environmental justice ordinance requires a holistic look at pollution — from traffic and other sources — when industrial development is proposed. That could help protect communities even if federal pollution limits are relaxed. The city has also launched an interdepartmental environmental justice working group, involving “every department that touches air, land and water,” as Tovar said.
The city program Green Homes Chicago funds energy efficiency upgrades for qualifying single- and multi-family homes, which could help fill the gap if federal home rebates are reduced, Tovar noted. Chicago Recovery Plan funding from federal pandemic relief and city bond issuances could help compensate for any funding that might be lost if IRA is undermined, she added.
“The role of cities and states becomes even increasingly more important right now,” Tovar said. “We have an ability to really demonstrate leadership in this moment. For cities like Chicago that have already made some progress, it’s up to us to ensure we’re sharing best practices and working together to really create those safeguards and fortify basic environmental and health protections at a local level. We’re certainly going to maintain our commitment, make sure we are rolling out our programs, and unwavering in our pursuit of environmental justice.”
Kari Lydersen wrote this article for Energy News Network.
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