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August 17 2012

11:47

On Our Radar: Rating the Oil and Gas Sector

The oil and gas industry and the federal government have the least positive images, as they did in polling last year.

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

January 26 2012

13:12

On Our Radar: A Beached Whale

An examination of the whale's ribs and vertebrae indicates that it was probably struck by a large vessel in a coastal shipping lane.

December 09 2011

18:24

Fracking Ohio's Utica Shale to "Boost Local Economy"? A "Total" Sham

It is a well-known fact that the unconventional gas industry is involved in an inherently toxic business, particularly through hydraulic fracturing ("fracking"), which the EPA just confirmed has contaminated groundwater in Wyoming. The documentary film "Gasland," DeSmogBlog's report "Fracking the Future: How Unconventional Gas Threatens our Water, Health, and Climate," and numerous other investigations, reports, and scientific studies have echoed the myriad problems with unconventional oil and gas around the globe.

What is less well-known, but arguably equally as important, is who exactly stands to benefit economically from the destruction of our land, air, and water in the gas industry's rush to profit from the fracking bonanza. The U.S oil and gas industry would have us believe that they are principally focused on ushering in American energy independence. But their claims are increasingly suspect as the real motivation of this industry becomes clearer by the day.

A hint: it's not the small "mom and pop," independent gas companies, but multinational oil and gas corporations. Another hint: it's often not even American multinational oil and gas corporations, but rather, foreign-based multinational oil and gas corporations who stand to gain the most.

France's Total S.A. Enters Ohio's Utica Shale, as well as Uganda, South Sudan and Kenya

On December 7, Bloomberg's Businessweek reported that Total S.A. is positioning itself to acquire 25 percent of Chesapeake Energy’s stake in Ohio's Utica Shale, valued at $2.14 Billion

Total S.A., the largest oil and gas producer in France, is a multinational corporation perhaps most notorious for its involvement in Iraq's "Oil-For-Food" scandal. In 2010, Total S.A. was accused of bribing former Iraqi dictator Saddam Hussein's officials to secure oil supplies. 


Total SA also brokered another big deal on December 7, this one in Uganda, a place I recently wrote about on AlterNet in a piece titled, "Did Obama Just Kick Off Another Oil War — This Time in Africa?" It appears the question raised and answered in my article is being confirmed more and more with each passing day.

Explaining the terms of the deal, Reuters wrote, "French oil major Total said it could build a pipeline from South Sudan to Uganda that would continue to Kenya’s coast, potentially solving the fledgling state’s headache about how to export its oil."

These announcements comes on the heels of a December 1 announcement by another foreign corporation, Norway's Statoil, stating that it "would like to add to its acreage position in the Eagle Ford Shale in South Texas as it looks to grow its unconventional oil and gas position in North America."

Speaking of corruption, by the way, Ohio is a natural landing spot for Total S.A.

Ohio: Home to Big Gas Money

Common Cause of Ohio, in a recent report titled "Deep Drilling, Deep Pockets," revealed that from 2001 through June 2011, Republican Governor John Kasich received $213,519 in campaign contributions from the gas industry. The Republican Senatorial and House Campaign Committees took another $210,250 from the gas industry during that same time period.

Not to be outdone, on the other side of the aisle, former Democratic Governor of Ohio, Ted Strickland, received $87,450 during that time frame. 

Top donors included the following:

  • Ohio Oil & Gas Producers Fund - $820,285
  • British Petroleum PAC & Employees - $215,438
  • Marathon Oil PAC & Employees - $207,054

Summing things up, Common Cause wrote,

Companies engaged in fracking contributed $2.8 million to state candidates, political committees, and parties in Ohio from 2001 through June 2011, helping the natural gas industry preserve what are some of the nation’s most lenient fracking regulations. Ohio does not require full disclosure of chemicals used in the fracking process, has stripped from local governments the power to regulate fracking, and allows fracking as close as 100 feet to a residence.

All in all, this is a bad deal for the people of Ohio, but a great deal for global multinational oil corporations, a pattern all too familiar in the American political fray.

Any way one slices it, the claim that the gas industry first and foremost is a "good neighbor" who will "benefit the local economies," is a total sham. 

 

July 14 2011

22:25

Walkout Sours Global Whaling Conference

Joined by allies, Japan, Norway and Iceland leave a whaling conference when countries try to call a vote on creating a whale sanctuary. Usually such decisions are made by consensus.

May 20 2011

15:30

On Our Radar: Indonesia Signs Deal to Protect Virgin Forests

Exceptions will be made for development considered "vital to the nation," like geothermal energy, oil, gas, electricity and land for rice and sugar cane.

August 25 2010

13:56

BP Oil Spill Has Little Impact on Global Drilling

Regulators in other countries with heavy deepwater drilling, like Brazil and Norway, have made few changes since the April 20 accident in the Gulf of Mexico.

June 10 2010

19:28

The Oil Supply Picture, Post-Spill

The International Energy Agency, an intergovernmental group that studies energy policy for industrialized nations, has released some preliminary projections on the disaster's impact on oil supplies. So far, it does not seem to be a game changer, but it is too early too know for sure.

June 02 2010

02:23

Indonesia Takes Concrete Steps to Address Deforestation as a Part of Agreement with Norway


Indonesia and Norway inked a deal last week to take concrete actions to reduce Indonesia’s deforestation emissions.  Indonesia is the world’s 3rd largest emitter of global warming pollution (when deforestation emissions are included) so this is a very important effort.  The deal between Indonesia and Norway was reached in the lead-in to the Oslo forest conference where over 50 countries agreed to a new Partnership to address deforestation (as I discussed here).  The deal with Indonesia is a critical agreement as it requires action from the Indonesian government and assistance from the Norwegian government to make a serious dent in the loss of Indonesia’s forests. 

In announcing the agreement Indonesian President Yudhoyono stated:

“Indonesia stands by its commitment to reduce our emissions by 26 per cent relative to business as usual levels by 2020. This we will do out of our own funds through a set of measures I will be announcing in the near future.” With the help of international partners, we could reduce our emissions by as much as 41 per cent”

This is a commitment made by Indonesia as a part of the Copenhagen Accord (as we’ve tracked here).  Its efforts to reduce deforestation will be critical to meeting that commitment as deforestation accounts for the majority of Indonesia’s emissions.  So the actions of Indonesia and Norway are an important component of ongoing efforts to implement specific actions to meet the commitments of these countries to reduce global warming pollution.

This agreement couldn’t come soon enough as Indonesia loses an area the size of approximately 12 football fields every day to deforestation.  So what have they agreed to do immediately to stop this trend? 

Details of the package are just emerging, so here are some of the core elements that have emerged to date.  Some of which have been spelled out explicitly in the Letter of Intent (LOI) between Norway and Indonesia and others have been reported in the press by leading Indonesian officials (I’ll note where they are explicitly in the LOI).

Indonesia will place a 2 year moratorium on granting new concessions for rainforest and peat forest clearing beginning in 2011 (in the LOI).  Concessions already granted to companies will not be stopped (a point that it seems will be one of the actions stemming from the agreement as I’ll discuss below).  This is an important freeze as it will essentially stop digging the hole by not granting more permits for future deforestation.  It is expected that this moratorium will be enshrined in an Indonesia Presidential decree, which hopefully will send a clear signal that this is real and will encourage cross-ministry coordination (both have been challenging issues in Indonesia in the past).

Norway will commit $1 billion to assist Indonesia in taking specific actions (in the LOI).  The agreement is to be implemented in three phases:

1. “Preparation”.  Beginning immediately the countries agree to specific steps including to:

  • Complete a national forestry strategy;
  • Establish a special agency reporting directly to President to coordinate efforts;
  • Create a funding mechanism to be managed by an internationally reputable financial institution to ensure that money is properly spent, managed, reported, and accounted; and
  • Select a province-wide pilot effort to reduce deforestation (the “province must have large intact tracts of rainforest and face planned deforestation and forest degradation projects of a scale that will have significant impact on national emissions levels if implemented”).

2. “Transformation”.  Starting in January 2011, they will begin the second phase which is to make Indonesia ready for contributions based on verified emissions reductions (the 3rd phase) while also “initiating large scale mitigation action[s]”.  Steps outlined in the agreement include to:

  • Develop a country-wide system for monitoring, reporting, and verifying emissions associated with deforestation and forest degradation, including independent international verification.
  • “Indentify, develop and implement appropriate Indonesia-wide policy instruments and enforcement capabilities” including: a 2 year suspension on all new concessions (as reported above), establish a database of degraded lands so that economic activity can be focused on these lands instead of converted peatland or natural forests; and enforcing existing laws against illegal logging and trade in timber.
  • Implement a province-wide pilot program to reduce deforestation emissions to begin in January 2011 and possibly a second to begin in 2012.  

3. “Contributions for Verified Emissions Reductions”.  Funding for the first 2 phases will be made on the basis of performance, but not necessarily on the basis of achieving specific emissions reductions.  So Phase 3, to begin in 2014, will be based upon implementing a national system of “contributions-for-verified emissions reductions”.  The system will be based upon annual contributions to Indonesia for independently verified national emissions reductions below an agreed deforestation “reference level”.

Indonesia will revoke existing forestry licenses held by palm oil and timber firms.  A key Indonesian official announced that as a part of the funding from Norway, the government will spend part of the money to compensate businesses that have existing concessions (as reported by Reuters).  The story reports that Agus Purnomo, head of the secretariat of Indonesia's National Climate Change Council, clarified that:

Compensation to permit holders could include cash, land swaps or other "amicable, workable and realistic solutions"

Permit holders will find out within six months if their concessions will be honoured, he said.  "Some of them don't have a valid permit, they are just making a claim," said Purnomo. "If they don't have a valid permit, we are not going to compensate. If they are getting it through bribery, we are not going to give" compensation.  

**********

This agreement includes three critical elements that are essential to addressing deforestation.  First, it includes clear political will by Indonesia that it wants to take critical steps to address its deforestation emissions (and it aims to establish some lasting institutions and structures to ensure that this will is signaled across all relevant players in the country).  Second, the agreement includes concrete steps that Indonesia will take.  And recent statements from key government officials provide additional signals that they are moving in the right direction.  Lastly, it sets aside dedicated resources from Norway to support Indonesia in implementing specific measures.

President Obama is expected to make a trip to Indonesia later this month, where there are rumors that the US and Indonesia will announce a partnership on deforestation reductions.  We expect that the US adds to and complements the promising signs emerging from the Indonesia and Norwegian agreement.

Hopefully this agreement and the subsequent US one will help set Indonesia on a path to addressing its global warming pollution from deforestation.  We’ll have to await further details and the implementation of specific steps before passing final judgment, but the signs are promising.

Cross-posted from the Natural Resources Defense Council Switchboard.

—————————–

Jake Schmidt is the International Climate Policy Director at the Natural Resources Defense Council where he helps to develop the post-2012 international response to climate change (for more information see his blog or follow him on twitter). And help track countries actions to reduce their global warming pollution.

May 21 2010

18:59

Averting a North Sea Blowout

As BP struggles to control oil leaking into the Gulf of Mexico from a blowout at the Deepwater Horizon rig a month ago, another company is working to prevent a blowout in the North Sea.

May 10 2010

19:09

Separate Oversight for Offshore Safety?

The potential conflicts attending agencies that both manage resource development and oversee its safety have prompted several countries do divorce these two functions.

April 20 2010

19:01

Statoil Remains Committed to Oil Sands

The Norwegian energy company says it is working on new technologies that will reduce carbon emissions related to the production of crude oil from Canadian oil sands.

March 23 2010

16:43

November 24 2009

13:13

Osmotic Power Debuts in Norway

The world's first osmotic power project opened today, harnessing the saltiness of the sea, along with freshwater, to produce a tiny amount of electricity.

September 25 2009

00:39

Support for an Agreement on REDD

It’s interesting to see the high-level support expressed at the Summit on Climate Change by the Latin American nations of Colombia, Ecuador and Guyana for an internationally-agreed mechanism for Reducing Emissions from Deforestation and Forest Degradation (REDD) in the post-2012 climate change accord to be negotiated later this year in Copenhagen.  However, conspicuous by their [...]
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