Bill Redefines 'Crude Oil' to Include Tar Sands for Excise Tax Purposes

A piece of legislation called the Tar Sands Tax Loophole Elimination Act is looking to change how certain types of fuel are taxed. Specifically, it expands the definition of "crude oil" under section 4612(a) of the tax code to explicitly include substances like bitumen (the heavy stuff in tar sands) and oil derived from kerogen (found in oil shale). This means these unconventional fuels would be subject to the federal excise tax typically applied to conventional crude oil, effective from the date the bill is enacted.

Redrawing the Tax Lines for Oil

The core change here is broadening what counts as taxable crude oil. Right now, the definition focuses on oil "from a well." This bill removes that phrase and adds specific mentions of bitumen, oil derived from bitumen, and oil derived from kerogen-bearing sources. Think of it this way: the thick, sludgy material extracted from tar sands, which requires different processing than traditional liquid oil, would now fall under the same tax umbrella (specifically, the one funding the Oil Spill Liability Trust Fund under section 4611). It's about ensuring these substances contribute to the fund designed to handle potential spills, regardless of whether they came from a traditional well.

Who Decides What's Taxed Next?

Beyond tar sands, the bill gives the Treasury Secretary new authority. The Secretary can designate other fuel feedstocks or finished products as 'crude oil' or 'petroleum products' subject to this tax. The criteria? If the substance is typically moved by pipeline, vessel, railcar, or tanker truck; if it fits the definition of 'oil' under the Oil Pollution Act of 1990; and if it's produced in large enough commercial quantities to pose a "significant discharge risk." This opens the door for future fuels, perhaps even some biofuels or synthetic fuels, to be included if they meet these conditions, particularly regarding transportation methods and spill potential.

The Bottom Line: Costs and Cleanup Funds

So, what does this mean in practice? The main goal seems to be closing a perceived loophole, ensuring that fuels like tar sands, which can cause significant environmental damage if spilled, contribute to the Oil Spill Liability Trust Fund. This could mean more revenue for that fund. On the flip side, companies extracting, processing, and transporting tar sands and potentially other fuels classified under the new rules could face higher tax burdens. Whether these increased costs would be passed on to consumers through higher prices for gasoline, heating oil, or other products remains to be seen, but it's a potential downstream effect for businesses and households.