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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 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. 

 

December 02 2010

16:08

How Much Untapped Oil Is There? The Answer Varies

The oil industry has protested a decision to reverse plans to allow drilling in the eastern gulf and along the Atlantic Seaboard, but it is uncertain how large the reserves actually are.

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 19 2010

00:50

Industry Strives for Cleaner Oil From Oil Sands

Extracting oil from oil sands is a messy business, but the industry is working on new techniques that are less destructive to forests and emit far fewer greenhouse gases.

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.
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