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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

August 02 2011

17:30

EPA Proposes First-Ever Federal Fracking Rules

The U.S. EPA is poised to enact the first ever rules on hydraulic fracturing (fracking) with a proposal that would allow the agency to regulate the practice under the Clean Air Act. The Clean Air route was chosen by the agency, as the U.S. Congress prohibited their attempts to regulate the practice of fracking under the Clean Water Act in 2005.

From Raw Story:

The new EPA proposal would limit emissions released during many stages of natural gas production and development, but explicitly targets the volatile organic compounds released in large quantities when wells are fracked. Drillers would have to use equipment that captures these gases, reducing emissions by nearly 95 percent, the EPA said.

The EPA contends that the measure would actually be a moneymaker for drilling companies. Though it might compel them to invest in new equipment, this equipment would allow them to capture methane gas currently lost in the drilling process, which they could then sell.

The EPA proposal is the result of a successful 2009 lawsuit brought against the agency by WildEarth Guardians and another advocacy group alleging that the agency had not updated air-quality rules as required. The EPA is supposed to review such rules at least every eight years, but in some cases had not done so for 10 years or more.


Despite the EPA’s claims that the tighter standards would actually increase the income of gas drillers, the industry was quick to speak out against the proposed rule changes. The Marcellus Shale Coalition issued the following response on their website:

While we understand that EPA is required by law to periodically evaluate current standards, this sweeping set of potentially unworkable regulations represents an overreach that could, ironically, undercut the production of American natural gas, an abundant energy resource that is critical to strengthening our nation’s air quality.

According to the EPA, the new rules would result in the following emission reductions every year:


Volatile Organic Compounds: 540,000 tons, an industry-wide reduction of 25 percent.

Methane – 3.4 million tons, which is equal to 65 million metric tons of carbon dioxide equivalent (CO2e), a reduction of about 26 percent.

Air Toxics –38,000 tons, a reduction of nearly 30 percent.


Once the EPA sets a date for implementation, the gas industry will have 60 days to submit any complaints or input on the new rules. While the date is not currently set, the American Petroleum Institute has already asked the EPA to delay implementation until at least August 2012.

July 07 2011

18:07

Gas Industry Spent "Staggering" Amount Lobbying in Pennsylvania Last Year

The gas industry spent $3.5 million last year attempting to convince Pennsylvania lawmakers of the benefits of drilling the state’s deposits of unconventional gas. According to lobbying disclosure reports filed with the Department of State, the lobbying blitz to influence public policy was orchestrated by a collection of 22 companies, the Marcellus Shale Coalition (MSC) and the Pennsylvania Independent Oil and Gas Association (PIOGA).

Rep. Greg Vitali of Havertown described the disclosed amounts as “staggering,” adding that, “it isn’t the type of spending you would find from fledgling companies.”

The Times-Tribune reports the figures as follows:

- Marcellus Shale Coalition: $1.1 million

 

- Range Resources Appalachia: $392,000

- Chesapeake Energy: $382,000

- Pennsylvania Independent Oil and Gas Association: $247,000

- East Resources Management: $225,000

- Chief Oil and Gas: $186,000

- Alpha Natural Resources: $160,000

- Dominion Transmission: $146,000

- Exco Resources: $130,000

- BG North America: $124,000

- EQT Corp.: $105,000

- Talisman Energy: $85,000

- Equitable Gas Co.: $78,000

- Columbia Gas of Pennsylvania: $75,000

- Consol Energy: $75,000

- CNX Gas Corp.: $59,000

- Exxon Mobil: $55,000

- Cabot Oil and Gas: $50,000

- Pennsylvania General Energy: $48,000

- XTO Energy: $41,000

- National Fuel Gas: $36,000

- NiSource: $36,000

The dramatic rise of the gas industry in Pennsylvania along with its increasing lobbying presence has put tremendous pressure on state lawmakers, who are charged with both facilitating the drilling boom and protecting the public from the health and environmental threats associated with drilling. Pennsylvania is home to some of the worst unconventional gas production disasters in the country, many stemming from the industry's use of the controversial hydraulic fracturing (fracking) method. 

On paper, 2010 was full of promise for those who felt oversight of the gas industry was inadequate. Throughout the year, numerous bills were proposed to tighten accountability of gas drilling activities, ranging from water protection issues, pipeline safety standards and drilling bans in state forests. Both the House and State voiced the need for industry severance taxes and the Department of Environmental Protection introduced more thorough standards regarding drilling pollutants, well construction and frack fluid chemical disclosure.

But despite the flurry of legislative proposals, very little was actually accomplished. Only two of the weaker proposed bills were passed into law, one designed to increase access to well production data and the other regarding roll-back taxes for landowners. The proposed severance tax was overshadowed by a less strict impact fee, which was further deferred until this fall.

The increasing lobbying activity in Pennsylvania demonstrates the industry’s continued efforts to expand unconventional drilling, despite growing public concern over the inherent risks of dirty fracked gas. The oil and gas industry is focusing its efforts primarily on confusing the public and influencing politicians, not on making their operations safe for public health and the environment.

“The legislative and regulatory issues facing our industry are countless,” says Marcellus Shale Coalition Vice President David Callahan. “While Marcellus development is still in its relative infancy, we recognize that common-sense policies – at all levels of government – are imperative.”

Coalition groups like the Marcellus Shale Coalition represent a variety of industry players, from continental drillers and national pipeline operators to multinationals such as ExxonMobil. 

Doubling up on efforts to influence policy, coalition members also exercise their own lobbying muscle. Range Resources, Chesapeake Energy and ExxonMobil each fund a private lobbying arm and, in the case of the latter two, full-scale public relations campaigns designed to influence public opinion regarding the benefits of unconventional gas

Gas industry lobbying in Pennsylvania has already created some troubling political alliances, like that between Gov. Tom Corbett and former energy executive C. Alan Walker, blurring the lines between public and private interests. 

At this stage there is little end to the spending spree in sight. Lobbying in the state is set to increase throughout 2011, with the MSC, Range Resources and PIOGA already spending a combined $557,000 between January and March of this year. Shell Oil Co., which only registering to lobby in Pennsylvania on January 3rd, spent $92,000 in the same period.

Image Credit: MarcellusMoney.org

June 23 2011

22:58

Economic Benefits of Unconventional Gas Drilling Overblown by Industry PR

A new poll suggests that Pennsylvanians are supportive of unconventional gas drilling in their state. Not because it is safe, but because they are convinced the economic benefits outweigh the risks to public health, water supplies and the environment. This kind of reasoning indicates that gas industry rhetoric is having an impact: advertise the benefits, downplay the risks, convince people that you know what you’re doing and there’s nothing to worry about.

And this is just what the industry has done. 

According to the Pittsburgh Tribune-Review, Pennsylvanians are a receptive audience to the extensive public relations campaigns waged by gas interests to confuse the public on the contentious issue of unconventional gas drilling. Between Exxon Mobil’s commercials, Chesapeake Energy’s first-person testimonials from “true Pennsylvanians,” and the Pennsylvania Independent Oil and Gas Association’s billboards lining the highway, industry is leaving no public opinion stone unturned.

Pennsylvania is at the forefront of the gas drilling bonanza since it sits atop the coveted Marcellus Shale, so the oil and gas industry sees every reason to invest in winning public confidence. 

The Marcellus Shale Coalition (MSC), an industry group with over 200 member companies, is dedicated to improving the reputation of the industry and influencing public policy to cater to gas interests. With companies paying membership dues between $15,000 and $50,000, the Coalition can afford to buy the opinion of respectable public figures like Pennsylvania’s former Governor turned-lobbyist Tom Ridge, who receives $75,000 a month from MSC to give speeches and guided tours of gas drilling sites.  He recently tried to convince Stephen Colbert that he’s “not a lobbyist” but DeSmogBlog quickly revealed that Ridge is definitely registered as a lobbyist in Pennsylvania.  

The Independent Petroleum Association of America (IPAA) and its industry funded offspring, Energy in Depth (EID), tag team with the MSC to construct a portrait of energy security dependent on unconventional gas drilling, while attempting to keep fracking - the industry’s Achilles heel right now - out of the spotlight.

The industry’s large PR expenditures and advertising outlays are about more than achieving popularity; these efforts are ultimately designed to influence public policy. “They need to distract the public from the problems,” according to Pennsylvania’s Sierra Club director, Jeff Schmidt.

Energy in Depth’s recent report on the ’shale revolution’ highlights the economic benefits of unconventional gas production in Pennsylvania, including the hiring spree created by the dirty gas boom. The Marcellus Shale Coalition makes the same boast, reporting accelerated hiring rates across the state. The Coalition’s president, Kathryn Klaber, embraced the figures, saying “people who were out of work and now have jobs thanks to Marcellus development are more than statistics.”

But industry critics point out that the June report from the Pennsylvania Department of Labor and Industry is misleading, intended to equate ‘hiring’ increases as job creation. But new hires do not equal new jobs and are often account for job replacements after workers have quit or been fired.

These industry groups, eager to downplay the environmental risks associated with gas drilling, tend to exaggerate the related economic benefits without telling the public about issues like out-of-state workers landing the jobs and taking their pay home, and expenses incurred by local governments related to damage to infrastructure such as roads, not to mention the high cost of responding to contamination incidents, blowouts and other industry mistakes. 

And it’s worth remembering the historical lesson that the economic effects of a temporary industry ‘boom’ are almost always followed by the bust, a fact the gas pushers don’t bother to discuss. 

Numerous reports highlight the cavalier optimism of gas production projections, the problems of dwindling returns in aging wells and, importantly, the irretrievable environmental damage associated with unconventional gas drilling.

These reports, while intending to make a long-term contribution to public policy, are often hard pressed to compete with industry-funded PR. 

Gas interests have a remarkable financial advantage over independent experts, environmental organizations and citizen led initiatives. In 2009, the MSC spent a total of $1.8 million on its PR initiatives while the IPAA has an $8 million budget, according to the Pittsburgh Tribune-Review

The battles currently being fought over unconventional gas drilling legislation leave the future of government oversight of gas fracking uncertain.  Uncertainty is never a good feeling for dirty energy’s Wall Street financiers, so the stakes are high for the industry to protect its cash cow (even if the real cows are dying from reckless industry practice). 

Tom Hoffman, executive of Carbon Communications Consultants, suggests that gas companies have to strike while the iron is hot. “It is important for them to continue to tell their side of the story because there are still decisions being made by policymakers.”

Strike they will, but a growing chorus of public opposition will continue to counter the rush towards another fossil fuel disaster.

 

 

June 13 2011

21:20

Tom Ridge Claimed "I'm Not a Lobbyist" on Colbert Report, But The Facts Prove Otherwise

Tom Ridge, on the Thursday, June 9 edition of the Colbert Report, claimed he is "not a lobbyist." A quick glance at his resume shows that nothing could be further from the truth.

Ridge, now 65 years-old, has worn multiple hats throughout his extensive political career. Among them: first ever head of the Department of Homeland Security (DHS) under the Bush Administration from 2003-2005, former Governor of Pennsylvania from 1995-2001, and former Republican member of the U.S. House of Representatives from from 1983-1995.<--break->

Upon leaving the DHS in 2005, Ridge commenced his career as a lobbyist, opening a lobby shop known as Ridge Global, located in Washington, D.C, an entity he still currently heads. Beyond this stint, though, Ridge is also a paid "consultant" (a.k.a. lobbyist) for the Marcellus Shale Coaltion. This Coalition is a "trade association" in disguise, for in reality it is a gas industry-funded lobbying organization.

That aside, one must look no further than the Pennsylvania Department of State's lobbyist registry for the real smoking gun evidence. (See attached lobbying disclosure for Tom Ridge.)<!--break-->

The registry shows that the Coalition has 11 lobbyists registered to advocate for fracking in the Marcellus Shale region, and in Pennsylvania in particular, among those listed include Coalition Executive Director Kathryn Klaber and Tom Ridge. The registry also shows that their paychecks come from none other than Ridge Global.

Open Secrets, a project of the Center for Responsive Politics, shows that since 2010, the Marcellus Shale Coalition has recieved $90,000 from Ridge GlobalOpen Secrets also shows that Ridge is currently a paid lobbyist for the U.S. Chamber of Commerce, chairing their National Security Task Force. Furthermore, he is the current recipient of a $900,000 a year paycheck from the Marcellus Shale Coalition.

And yet, though the evidence against his claim is quite damning, Ridge had the chutzpah to begin his June 9, 2011 interview on the Colbert Report with a bang, claiming he is "not a lobbyist."

Not a lobbyist? Under what definition, exactly?

As it turns out, Ridge has previously been scolded by the Justice Department for failing to properly register as a lobbyist. Perhaps Mr. Ridge needs to review the definition of 'lobbyist.'  Here is the Washington Post's definition, for instance: "A person who tries to influence legislation on behalf of a special interest."

Mr. Ridge's work on behalf of the gas industry clearly qualifies as lobbying under any reasonable review.

 

AttachmentSize Tom Ridge PA Lobbying Disclosure.pdf7.31 MB
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