A tax loophole exempting tar sands pipeline operators from paying an eight-cent tax per barrel of oil they transport in the US is costing the federal Oil Spill Liability Trust Fund millions of dollars every year. With expected increases in tar sands oil production over the next five years, this loophole may have deprived US citizens of $400-million dollars worth of critical oil-spill protection funds come 2017.
According to a report by the US Natural Resources Committee the federal government pays for immediate oil-spill response from the Liability Trust Fund which is supported by an excise tax on all crude oil and gas products in the US.
But in 2011 the Internal Revenue Service exempted tar sands oil from the tax, saying the substance did not fit the characterization of crude oil.
This exemption has come under scrutiny this week after Exxon Mobil's Pegasus pipeline ruptured in Mayflower, Arkansas, releasing 300,000 litres of tar sands oil and water into a residential neighbourhood and surrounding wetlands. Because the line carried tar sands-derived oil from Alberta, Exxon was exempt from paying into the spill liability fund for the corrosive fuel's potential cleanup.