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August 03 2012

12:00

Delaware Tax Haven: The Other Shale Gas Industry Loophole

Most people think of downtown Houston, Texas as ground zero for the oil and gas industry. Houston, after all, serves as home base for corporate headquarters of oil and gas giants, including the likes of BP America, ConocoPhillips, and Shell Oil Company, to name a few.

Comparably speaking, few would think of Wilmington, Delaware in a similar vein. But perhaps they should, according to a recent New York Times investigative report by Leslie Wayne.

Wayne's story revealed that Delaware serves as what journalist Nicholas Shaxson calls a "Treasure Island" in his recent book by that namesake. It's an "onshore tax haven" and an even more robust one than the Caymen Islands, to boot.

The Delaware "Island" is heavilized utilized by oil and gas majors, all of which are part of the "two-thirds of the Fortune 500" corporations parking their money in The First State.

Delaware is an outlier in the way it does business,” David Brunori, a professor at George Washington Law School told The Times. “What it offers is an opportunity to game the system and do it legally.”

The numbers are astounding. "Over the last decade, the Delaware loophole has enabled corporations to reduce the taxes paid to other states by an estimated $9.5 billion," Wayne wrote

"More than 900,000 business entities choose Delaware as a location to incorporate," explained another report. "The number…exceeds Delaware's human population of 850,000."

Marcellus Shale Frackers Utilize the "Delaware Loophole" 

The New York Times story also demonstrated that the shale gas industry has become an expert at utilizing the "Delaware Loophole" tax haven to dodge taxes, just as it is a champion at dodging chemical fluid disclosure and other accountability to the Safe Drinking Water Act, thanks to the "Halliburton Loophole." The latter is explained in great detail in DeSmogBlog's "Fracking the Future."

Utilization of the "Delaware Loophole" is far from the story of a few bad apples gone astray for the industry. As Wayne explains, the use of this "onshore tax haven" is the norm.

More than 400 corporate subsidiaries linked to Marcellus Shale gas exploration have been registered in Delaware, most within the last four years, according to the Pennsylvania Budget and Policy Center, a nonprofit group based in Harrisburg that studies the state’s tax policy.

In 2004, the center estimated that the Delaware loophole had cost the state $400 million annually in lost revenue — and that was before the energy boom.

More than two-thirds of the companies in the Marcellus Shale Coalition, an industry alliance based in Pittsburgh, are registered to a single address: 1209 North Orange Street, according to the center.

These fiscal figures, as Wayne points out, predate the ongoing shale gas "Gold Rush" in the Marcellus. SEIU of Pennsylvania has calculated $550 million/year in lost tax revenue in the state from the shale gas industry due to the loophole.

The Pennsylvania House of Representatives set out to tackle the "Delaware Loophole" quagmire in the spring of 2012, but merely offered half-measure legislation that would have allowed corporations - including the frackers - to continue gaming the system. Coryn S. Wolk of the activist group Protecting Our Waters summarized the bill in a recent post:

In March, 2012, the Pennsylvania House of Representatives created a bipartisan bill, HB 2150, aimed at closing corporate tax loopholes. However, as the Pennsylvania Budget and Policy Center noted in their detailed opposition to the bill, the bill would have cost Pennsylvania more money by soothing corporations with major tax cuts and leaving the loopholes accessible to any clever accountant.

Tax cheating in Delaware goes far above and beyond the Marcellus Shale. All of the oil and gas majors, with operations around the world, take full advantage of all Delaware has to offer.

"Piping Profits"

If things in this sphere were only limited to shale gas companies operating in the Marcellus Shale, the battle would seem big. Big, but not insurmountable.

Yet, as the Norway-based NGOPublish What You Pay points out in a recent report titled, "Piping profits: the secret world of oil, gas and mining giants," the game is more rigged than most would like to admit.

How rigged? Overwhelmingly so.

The report shows that ConocoPhillips, Chevron, and ExxonMobil have 439 out of their combined 783 subsidiaries located in well-known tax havens around the world, including in Delaware. All three companies maintain fracking operations, as well, meaning they benefit from both the Halliburton and Delaware Loopholes.

Adding BP and Shell into the mix, Publish What You Pay revealed that the five majors have 749 tax haven subsidiaries located in Delaware out of a grand total of 3,632 global tax haven subsidiaries. This amounts to 20.6-percent of them, to be precise.

These figures moved Publish What You Pay's Executive Director, Mona Thowsen, to conclude, “What this study shows is that the extractive industry ownership structure and its huge use of secrecy jurisdictions may work against the urgent need to reduce corruption and aggressive tax avoidance in this sector."

Tax Justice Network: $21-$32 Trillion Parked in Offshore Accounts

A recent lengthy report titled "The Price of Offshore Revisited" by the Tax Justice Network reveals just how big of a problem tax havens are on a global scale, reaching far beyond Delaware's boundaries.

As Democracy Now! explained,

[The] new report…reveals how wealthy individuals and their families have between $21 and $32 trillion of hidden financial assets around the world in what are known as offshore accounts or tax havens. The conservative estimate of $21 trillion—conservative estimate—is as much money as the entire annual economic output of the United States and Japan combined. The actual sums could be higher because the study only deals with financial wealth deposited in bank and investment accounts, and not other assets such as property and yachts.

The inquiry…is being touted as the most comprehensive report ever on the "offshore economy." 

The Democracy Now! interview below is worth watching on the whole, as oil and gas industry "offshoring" is but the tip of the iceberg.

Photo CreditGunnar Pippel | ShutterStock

Exhaustive Study Finds Global Elite

July 14 2011

17:01

David Legates Asked To Step Down As Delaware State Climatologist

David Legates announced this week that he was asked to step down as Delaware State Climatologist, a position he held for seven years. A long-time denier of the human contribution to climate change, Legates’ tenure as State Climatologist has always been a controversial one.

Back in 2007, because of his stance on climate, then-governor Ruth Ann Minner insisted that Legates stop using the formal title in any public statements on climate change policy. Minner wrote to Legates:
"Your views on climate change, as I understand them, are not aligned with those of my administration. In light of my position and due to the confusion surrounding your role with the state, I am directing you to offer any future statements on this or other public policy matters only on behalf of yourself or the University of Delaware, and not as state climatologist."
Legates maintained the title, however, which is designated by the Dean of the public university’s College of Earth, Ocean, and Environment.
But this week, according to Legates himself, the Dean asked him to “step down.”
Legates sent the following note to his email list:
From: David R. Legates
Date: Tue, Jul 12, 2011 at 10:48 AM
Subject:  New State Climatologist
Dear All,
  I want to notify you of a change in the Office of the Delaware State
Climatologist.  I have been asked by our Dean's office to step down and
the former Deputy Dean, Dr. Daniel J. Leathers, will be reassuming the
title of the Delaware State Climatologist.  He will be representing the
Office in Asheville and I hope you will welcome him.
  I thank you for the opportunity to serve as the Delaware State
Climatologist for the last seven years and to work alongside each of you.
Sincerely,
David R. Legates
The obvious question becomes: why now? Legates had endured as a denier in the role of official Delaware State Climatologist through seven years under Democratic governors who openly support action on climate change.

I placed multiple calls to both the University of Delaware and the Delaware Department of Natural Resources and Environmental Control (DNREC), and was unable to find anyone willing or able to go on the record to explain why Legates was asked to step down from the position. 

The timing could indicate that it had something to do with Legates’ close ties to Wei Hock “Willie” Soon, another prominent denier who has recently found himself embroiled in controversy. Late last month, Greenpeace released documents acquired through a Freedom of Information Act request, and these documents reveal deep financial ties between Soon and many oil and gas companies, including ExxonMobil. The most startling takeaway from the Greenpeace report was that Soon has received more than $1 million from the oil and coal industries since 2001, and that “since 2002, every new grant he has received has been from either oil or coal interests.”

Soon, who is not a climatologist, but an astrophysicist with the Harvard-Smithsonian Center for Astrophysics, has made a living over the past decade by taking an outspokenly skeptical stance to man made climate change. Soon’s name is also often linked to Legates’: the two co-authored the notorious and mightily-debunked “polar bear study” paper in 2007, the two are both listed as “ "experts" for the George C. Marshall Institute, a Washington, DC-based think-tank that has received over $700,000 in funding from ExxonMobil, and Soon has referred to Legates as a colleague during Congressional hearings.

Further, buried in Greenpeace’s report is an eye-opening email sent by Soon in 2003 that anticipates the release of the IPCC’s Fourth Assessment Report, and more than hints at an overt and calculated plot to discredit the report’s findings. The email was sent to five recipients, including a “Dave,” that Greenpeace analysts say is “most definitely Legates.”

Finally, Soon and Legates were the only two “experts” featured in an Idea Channel video that portrays current warming as part of a “natural solar cycle.”

Cindy Baxter of Greenpeace US’s Research Department believes that the University’s decision to replace Legates as Delaware State Climatologist likely involved his close ties to the controversial Soon. "When we were investigating Willie Soon, it became clear that David Legates was deeply involved in many of his fossil fuel industry-funded attempts to undermine climate science,” said Baxter. “It's heartening to see that the University of Delaware has finally seen the light."

April 01 2011

12:23

February 07 2011

20:36
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