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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

December 01 2011

22:43

LNG Groundhog Day: Cheniere Energy Signs Yet Another Gas Export Deal on Gulf Coast

Another day, another unconventional gas export deal signed. Nascent North American LNG (liquefied natural gas) export deals are happening so fast and furiously that it is hard to keep track of them all.

The latest: On November 21, Cheniere Energy Partners signed a 20-year LNG export deal with Gas Natural Fenosa, an energy company which operates primarily in Spain but also in such countries as Italy, Mexico, Colombia, Argentina, and Morocco. Cheniere will maintain the Sabine Pass LNG export terminal located off of Sabine Lake between Texas and Louisiana, which feeds into the Gulf of Mexico, while Gas Natural Fenosa will ship the gas to the global market.

Cheniere, which made waves when its CEO Charif Souki announced that his corporation's business model would center exclusively around LNG export terminals, also recently signed a 20-year export deal with BG Group, short for British Gas Group.

Like the recent export deal with BG Group, which involves carrying fracked unconventional gas from various shale basins around the United States via pipelines to the Sabine Pass LNG export terminal, the Gas Natural Fenosa deal also centers around the export of gas from Sabine Pass to the global market.

This new deal will presumably center around shipment of LNG to the Latin American market, whereas the BG Group deal centers around exports to the European market.

A press release explaining the details of the deal reads, “LNG will be loaded onto Gas Natural Fenosa's vessels…[with] twenty years commencing upon the date of first commercial delivery, and an extension option of up to ten years. LNG deliveries are expected to commence in 2016.”

It is increasingly clear that export is the name of the game for the gas companies fracking all over America, exploding the industry's claims to support U.S. energy independence.

A recent Senate hearing confirmed that the industry's plans to export gas from the U.S. will raise gas prices for Americans.

So much for that oil and gas industry canard that unconventional gas fracking "promises more affordable energy for Americans."

 

Image Credit: Oleksandr Kalinichenko / Shutterstock

November 29 2011

01:39

Are New York Lawmakers Poised To Throw Upstate Residents Under The Fracking Bus?

Despite last week’s temporary win protecting the Delaware River Basin and its inhabitants from natural gas fracking, the debate rages on in New York State. Lawmakers, industry lobbyists and concerned landowners have debated for over a year about whether or not to open up the state to the Marcellus Shale fracking bonanza.

New York Governor Andrew Cuomo’s stated commitment to vote no in the Delaware River Basin vote was promising, but it is offset by the fact that he has assembled a secretive 18-person “fracking panel” which Food & Water Watch executive director Wenonah Hauter recently alleged is comprised of many “strongly self-interested and industry-biased” individuals. Some environmental groups are concerned that this panel seems rigged to give the green light to fracking in New York.



At previous public hearings, tensions have already run high with both supporters and opponents lining up hours beforehand to ensure their turn to speak out on this highly contentious issue.



Most of the proponents of gas fracking continue to argue the economic mantra of job creation and domestic energy security, even though multiple reviews have debunked the gas industry’s lofty job projections. Food & Water Watch released a report indicating that many of the jobs created would likely be short-term and favor contract workers from outside the state. Other watchdogs of industry rhetoric, including Senator Ron Wyden (D-OR), point out that the industry's rush to export gas from the fracking boom will lead to much higher gas prices for Americans, contradicting the industry's alleged commitment to domestic energy security.

There are also important questions about just how much gas there is underneath New York to warrant such extreme energy development.  After a recalculation of the resource potential of the area, geologists at the U.S. Geological Survey dropped their estimate of the recoverable gas by a quarter. They determined that the amount of reasonably recoverable gas would only meet US demand for four years instead of sixteen.

Residents who had initially accepted gas leases have since voiced their regret, stating that the lease payments from industry weren’t worth the impacts on their land, water and communities.



Meanwhile, citizens concerned about fracking in upstate regions question the fact that Governor Cuomo is adamant about protecting New York City’s watershed, yet he seems dead set on allowing fracking upstate, in effect creating ‘sacrifice’ zones that would imperil water supplies for upstate communities in favor of protecting city residents.


"I resent the fact that the water of New York City and Syracuse is deemed by the DEC to be more important than the rest of the state," State Senator James Seward (R-Milford) told The Daily Star newspaper of Oneonta, NY.



"What's the difference between New York City kids and my kids?" Kim Jastremski of Cooperstown said at one meeting, according to the Wall Street Journal.



Even more discomforting is a page on the DEC’s website attempting to explain “What We Learned From Pennsylvania”. It not only passively admits that mistakes were made in PA, but also seems to loosely translate the problem as, “we screwed up there” but “next time we’ll make it better.”

NYDEC Commissioner Joseph Martens believes that fracking can be undertaken safely in certain areas despite reports questioning the effectiveness of any of the state’s proposed regulations.



Perhaps the Commissioner and Governor should visit the DEC website more often. Ironically, there’s a whole page dedicated to NY State’s watersheds entitled, “We All Live in a Watershed" that shows every inch of the state belonging to some kind of watershed. If that’s the case, and Governor Cuomo actually intends to stand by his word of “keeping fracking out of the watershed,” he should clarify why he’s leaving most of the state’s watersheds vulnerable to contamination from fracking upstate.



Next add NYC Mayor Bloomberg to the mix, whose $50 million donation to the Sierra Club to take on Big Coal is laudable, but some have questioned whether it was, in part, a strategic attempt to gain support for gas extraction by pitting dirty coal against “clean” gas.

“At least natural gas is better than coal!! Do you really want coal?” Mayor Bloomberg said recently, trying to turn this into some kind of false, fossil fuel Sophie’s choice.

It’s true that gas-fired power plants release less carbon dioxide, but that’s only part of the picture. Studies that have attempted to take into account the full life-cycle impact of gas development, including potent methane emissions into the atmosphere during the drilling and transportation phases, indicate that gas may in fact pollute the air much more than coal and oil.

Bloomberg has also referred to natural gas as an “alternative” energy source, attempting to equate this dirty fossil fuel with wind, solar and other renewables. While it is an “alternative” energy in that it is a difference choice from coal, it is still a filthy form of reckless energy that threatens our water, air quality and the global climate.



Many citizens are waking up to the fact that the gas fracking rush is not a true solution to our energy problems. Switching from coal to gas still leaves us addicted to dirty fossil fuels, when the real solution is to focus on transitioning to a truly clean energy future that will create better jobs and safeguard our communities against the pollution threats that all fossil fuels pose.

The fireworks are sure to continue at public hearings this week in Loch Sheldrake and New York City on Tuesday and Wednesday, respectively. 



September 06 2011

23:39

New West Partnership Includes CAPP Lobbyists in Fracking Policy Development

The British Columbia Ministry of Energy was designated a “lead agency” in a backroom collaboration with Alberta and Saskatchewan to address water concerns for the province’s rapidly expanding shale gas industry. The New West Partnership, an undisclosed collaboration between Canada's three western provinces to expedite shale gas extraction, has held four secret meetings since July 2011 to discuss water issues related to fracking, according to a leaked briefing note, released today by the BC Tap Water Alliance (BCTWA).

The leaked document, including an attached directive, outlines the group’s strategies to streamline gas production across the West while minimizing public and stakeholder involvement. The partnership project, which is aimed to design streamlined policy regarding gas extraction including the controversial technique fracking, is also posed to curtail public concern with “proactive” public relations campaigns that will respond to the “ill-informed campaigns” of environmental NGOs, public media and local communities. 

The Project Charter outlines the New West Partnership’s intentions to manage public opinion with ‘consistent messages’ regarding environmental concerns which are “potentially problematic” for shale gas development. Despite the group’s pretense to stakeholder transparency and “enhanced communication,” the only external body consulted so far is Canada’s largest oil and gas lobby, the Canadian Association of Petroleum Producers (CAPP). According to the BCTWA press release, the internal meetings held by provincial regulators and government officials included three unregistered lobbyists representing CAPP, prompting a complaint from the Alberta Federation of Labour.  
 
After receiving a copy of the leaked documents the Alberta Federation of Labour filed an official complaint with Alberta’s Ethics Commissioner citing a “possible contravention of the Lobbyist Act.” Although CAPP is a registered lobby body, the Federation conceded, none of the present lobbyists were registered to lobby on behalf of CAPP. The in-house meetings, where government officials hosted government and public relations consultants from Encana Corporation, Canadian Natural Resources Limited and Shell Canada, caused some disquiet for the Federation, causing them to state: “it is our belief that the public interest has been undermined in this case.”
 
Shale gas extraction and fracking, although occurring at accelerating rates across the three provinces, have escaped much of the public approval process. In British Columbia especially, calls for an independent investigation into the process have gone largely unheeded. Similar demands in Alberta pose no exception.
 
“The leaked documents from Alberta are fundamentally disturbing, and challenge the core principles of our democracy” says BCTWA coordinator Will Koop. “The elected leaders and executive energy administrators of western Canada are caving into the petroleum industry, and are excluding public stakeholders from the fracking table.”
 
“If CAPP gets its way, not only will the public suffer from an ill-natured public relations scheme thrust upon it by its own government, but it will have to fund it as well.”
 
In an interview with DeSmogBlog, Koop went on to say, "I know from experience that the government has been ignoring our calls, calls from other groups, and from independent MLAs to investigate the process. This document and the information that is being leaked is going to help the public understand where the politics are going."
 
Part of the problem, says Koop, is that shale gas development tends to occur in remote areas. "I think in part the lack of public engagement has to do with where the fracking is occurring - its quite far removed from where the general public lives and there hasn't been enough critical coverage in the media over a period of a number of years to deal with these concerns."
 
"British Columbia is kind of being captured by the politics of Alberta and the issue of fracking hasn't really gotten the proper attention, evaluation and analysis by British Columbians." The government agencies in BC, continues Koop, are keeping their distance from the issue. The Ministry of Forests, he says, has not completed a thorough analysis of the lands being used and sold through the leasing process run by the BC Oil and Gas Commission.  And the Commission itself is dropping the ball. "What we need is a comprehensive evaluation of what is going on and it isn't there. The Oil and Gas Commission is not doing it and they are the ones with the mandate to do so."
 
The 2011 BC Oil and Gas Conference, slated to begin tomorrow, is meant to be hosted in the spirit of “Communities Leading Change,” yet the lack of community participation to date suggests that unconventional gas development is meant to occur with or without public consent. Like other jurisdictions, Canada’s western provinces need to find the community voice necessary to join the discussion and to ensure that more than just industry lobbyists are at the table.

March 21 2011

20:30

Gas Industry Working Overtime to Smother Revived FRAC Act Efforts To Rein In Hydraulic Fracturing

Last week, US Senators Robert Casey (D-PA) and Frank Lautenberg (D-NJ) reintroduced legislation to the Senate that would close the oversight gap that the gas industry has taken full advantage of since 2005. The “Fracturing Responsibility and Awareness of Chemicals Act,” commonly known as the FRAC Act, would close the Halliburton Loophole in Dick Cheney’s infamous 2005 Energy Policy Act, which exempted hydraulic fracturing from the auspices of the Safe Drinking Water Act (SDWA).

Hydraulic fracturing is used in 90% of all unconventional natural gas wells in the U.S. and involves the injection of millions of gallons of water, sand and dangerous chemicals into the ground. The bill would also require that the natural gas industry publicly disclose the chemicals they use to drill for unconventional gas. These chemicals, including potent cancer-causing agents, are protected as industry trade secrets.

The FRAC Act was originally introduced as a set of twin bills to the House and Senate in 2009 but died in the last session of Congress. According to new supporter Senator Frank Lautenberg, the FRAC Act will give the EPA the necessary backing to, at the very least, properly investigate and assess the risks associated with hydraulic fracturing.

The industry’s aggressive lobbying campaign against the FRAC Act is part of a larger agenda to limit federal oversight of gas drilling. The legal void created by the Energy Policy Act in 2005 essentially crippled the Environmental Protection Agency's (EPA) ability to properly monitor the boom in gas fracking activity, especially the potentially serious threat to drinking water supplies. A long history of industry pressure on EPA scientists is also present on this issue, leading to the narrowing of scope in the EPA’s investigations and the elimination of critical findings when it comes to certain fracking threats. <!--break-->

As a result of the Halliburton Loophole, the states are left to monitor the gas industry's rapidly evolving drilling practices themselves, with few federal standards in place to safeguard public health and water supplies.  A growing number of communities impacted by the gas industry’s fracking practices consider this reliance on state agencies a risky gamble.  In many states, the state oil and gas commission handles both the oversight and promotion of the industry, and as one recent report noted, “the primary mission of these agencies has been to facilitate natural gas extraction and increase revenues for the states.”  

The gas industry has responded to the proposed legislation with a misleading advertising and lobbying campaign, attempting to pressure lawmakers to keep oversight at the state level and limit federal participation. 

Industry-sponsored reports have praised the regulatory oversight of state commissions, and lobby groups have suggested that federal engagement would be bad for the environment.

Among the favorite scare tactics employed by the gas industry is the suggestion that federal involvement would mean millions in lost state revenue, further unemployment and compromised energy security. Industry lobbying efforts have so far succeeded in stalling any momentum towards the implementation of much-needed federal standards for fracking.

But as the recent New York Times’ “Drilling Down” series on gas drilling shows, the industry is in serious need of more thorough federal oversight.  According to these reports, the states are failing to monitor radioactive drilling wastes, much less ensure their proper disposal. As a result, the Times notes how the wastes can end up back in streams and rivers that source the drinking water supply. A single gas well can produce over a million gallons of radioactive waste water contaminated with cancer-causing agents, posing a threat to drinking water and health if not properly handled and disposed. 

The FRAC Act is one crucial step in the long journey to proper accountability for all risky practices in the gas industry. But powerful gas industry lobbying forces will work to derail it. In fact, they already are. 

Lee Fuller, executive director of Energy in Depth, the most vocal industry front group, was quick to attack the reintroduction of the FRAC Act, saying the bill is based on “fundamentally incorrect information.” EID insists that hydraulic fracturing was never regulated under the Safe Drinking Water Act (SDWA), so the legislative attempt to “restore” this regulation is misguided. Yet the process was always regulated by the Underground Injection Control (UIC) program of the SDWA until language inserted into the 2005 Energy Policy Act excluded the underground injection of fluids for the sake of oil and gas extraction.  

This isn’t the only EID claim intended to confuse the public, as DeSmogBlog recently revealed

While Energy In Depth suggests that hydraulic fracturing has “become a victim of its own success,” the citizens whose water supplies and health have been put in jeopardy would beg to differ. 

The industry is still parroting the same refrain: that ‘no proven instances of water contamination have been directly linked to hydraulic fracturing.’ Yet with mounting instances of water contamination occurring across America, all this statement reflects is the near impossibility of bringing this cavalier industry to account. 

Congress must work quickly to pass the FRAC Act and to safeguard the public from the gas industry’s fracking mess.

 

November 30 2010

17:25

November 10 2010

15:31

October 30 2010

12:11

Betting Big on Natural Gas

An Exxon Mobil executive offers passionate praise for the product that the corporation has staked so much on.

July 23 2010

12:28

Passions on Display at E.P.A. Meeting

Recriminations were the order of the day at an E.P.A.-sponsored public meeting in Pennsylvania on a form of gas drilling known as hydraulic fracturing.

July 22 2010

23:14

Huge Turnout for E.P.A. Fracking Hearing

At a hotel ballroom in southwestern Pennsylvania, nearly 1,000 stakeholders gathered for a public meeting convened by the E.P.A. as it prepares to investigate the drilling practices used in the natural gas business.

July 09 2010

17:17

July 04 2010

12:22

June 11 2010

15:38

For Oil's Cousin, Good Luck and Bad

Some experts say that oil's recent bad luck could translate into good luck for gas, which is plentifully available in the United States, is cleaner-burning than oil and can be used as a transportation fuel - either directly, through compressed natural gas, or indirectly as a utility source for powering electric cars.
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