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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 22 2010

21:00

Coal Lobbyist Grinches Stole 2010 As Obama Transparency Initiative Falters

Despite President Obama’s campaign pledges of government transparency and limiting the influence of K Street lobbyists on policymaking, coal industry lobbyists got their stockings stuffed with wishes this year in Washington.  Climate and energy legislation is dead, the Environmental Protection Agency is entering its 21st year of failing to regulate mercury emissions from coal plants, coal ash regulations are delayed indefinitely, mountaintop removal mining continues, and the myth of “clean coal” is alive and well thanks to continuing praise by President Obama and Vice President Biden.

Happy Holidays!  Here’s a lump of coal, no two, and some coal ash slurry to wash it down with.  Don’t worry, it’s “clean coal!”

The Coal Grinches aren’t here to steal Christmas gifts from Whoville residents.  They’re here to steal a safe climate, clean water and breathable air from every American man, woman and child. And we won’t know when they’ve come and gone, thanks to the White House’s apparent neglect (or shutdown?) of the “open government” records of its meetings with lobbyists. <!--break-->

Arianna Huffington recently pointed out statements that Barack Obama made about government transparency as a candidate and early on in his presidency, noting that he hasn’t followed through on his rhetoric, and in fact seems headed down the well-worn path laid by the transparency-trampling Bush administration.


Back in the year 2007, B.W. (Before WikiLeaks), Barack Obama waxed lyrical about government and the internet: "We have to use technology to open up our democracy. It's no coincidence that one of the most secretive administrations in our history has favored special interest and pursued policy that could not stand up to the sunlight." …
Not long after the election, in announcing his "Transparency and Open Government" policy, the president proclaimed: "Transparency promotes accountability and provides information for citizens about what their Government is doing. Information maintained by the Federal Government is a national asset."


Yet here we are closing the books on 2010 and the public is witnessing shockingly little openness and accountability from this, the “transparency” Administration.

The Obama White House has opened its doors wide for coal lobbyists, and his regulatory agencies are struggling to stand up to the onslaught of coal industry lobbying dollars.  Witness the recent and repeated delays and setbacks on critical regulations for dangerous coal industry practices that threaten public health and the environment.

Let’s take a look at coal industry lobbying efforts targeting the White House, or more specifically, at what little we know about just how extensive the reach of coal power players is under Obama’s watch.

OMB “Open Government” Records Scant To Begin With, Increasigly Barren
According to the Office of Management and Budget’s “open” meeting records database, the last publicly recorded meeting between the White House, EPA staff and coal industry lobbyists took place on April 2, 2010.

Since then, we’ve seen zero OMB disclosure of further meetings with coal lobbyists. (Who thinks there haven’t been any?) In fact, there are no records of meetings with outside lobbyists on any solid waste issue since September 22, 2010. Worse, there are few or zero records of any 2010 meeting activity for other White House offices as well. (We know they are holding meetings, after all, that’s what they do.)

OMB records of meetings involving EPA staff and outside lobbyists trail off in May 2010.

And the OMB’s disclosure page for the EPA administrator office’s meetings with outside lobbyists contains a sole archival entry from June 2006. (While the EPA is still reporting the daily schedules of its senior managers on its own, that cumbersome presentation does not distinguish between events, failing to parse actual meetings with outside lobbyists and White House staff, or to disclose the materials distributed to attendees as the OMB’s WhiteHouse.gov records are designed to do.)

Beyond what isn’t included in OMB’s meeting records, it is worth noting what is there is more than a bit outdated.  For example, the scandal-ridden Minerals Management Service is still listed as part of the Department of Interior, even though it was torn apart and renamed in May by Interior Secretary Ken Salazar in the wake of multiple embarrassing revelations about MMS’s close relationship with industry lobbyists.

Cass Sunstein, the administrator of OMB’s Office of Information and Regulatory Affairs (OIRA), has repeatedly extolled the virtues of government transparency and the public’s right to know.

But it seems that a potentially useful tool designed by Sunstein’s office to allow the public access to basic information about meetings between White House and agency staff and outside lobbyists has either been neglected or abandoned entirely.

This lack of disclosure appears to defy the “Open Government Directive” launched a year ago this month by the Obama administration. In practice, our window into the Obama adminstration’s meetings with lobbyists is currently draped with blackout curtains.

Coal Lobbyists Swarmed White House Last Winter
The best indication of how easily coal lobbyists are getting their message across to White House staff comes from last winter, when the coal ash issue was causing a rift between the White House and EPA.  An October 2010 report produced by DeSmogBlog and PolluterWatch documented a lobbying swarm by coal ash interests involving dozens of secretive meetings with White House staff between October 2009 and April 2010.

The result? The coal lobbyists’ White House blitz achieved in short order exactly what the industry wanted by delaying federal regulation of coal ash waste indefinitely. 

Keep in mind that EPA administrator Lisa Jackson first promised a rapid regulatory response on coal ash during her confirmation hearing in January 2009 (on the heels of the December 2008 TVA disaster).  Jackson followed through partially by proposing coal ash rules sixteen months ago, when she promised to issue a decision by the end of 2009.

"We've promised that we will address regulation for coal ash by the end of the year [2009]," Jackson said. "And so, by the end of the year, we'll make that regulatory determination as to whether or not it's hazardous."


Yet EPA just announced another delay this week, stating that the agency has no idea when it will get around to issuing its ruling on whether to classify coal ash as hazardous waste.

The never-ending coal ash battle demonstrates the immense success of coal industry lobbyists in 2010, and yet coal ash is only one – albeit a significant one – of the ongoing threats posed by our addiction to dirty, dangerous coal. 

There’s also the continued assault on Appalachian communities and waterways posed by mountaintop removal mining.

A wise man once remarked:

“We’re tearing up the Appalachian Mountains because of our dependence on fossil fuels.  We have to find more environmentally sound ways of mining coal than simply blowing the tops off mountains.”


What happened to that guy anyway?  Oh, he’s in the White House now.  That was Barack Obama at a campaign rally in Lexington, Kentucky in August of 2007.

How long will President Obama let the coal industry’s lobbyists dictate his policy response to the number one climate killing fossil fuel? How many more pollution-related deaths will result thanks to the lobbying muscle of polluters who are holding Obama’s regulatory agencies captive?

When will the Obama administration provide the records of all the meetings it has held with coal industry lobbyists in 2010 – and all other industry lobbyists for that matter?

The Hill recently reported on a “thaw” in the Obama administration’s relations with K Street.  

“…since Democrats suffered heavy losses in November, lobbyists have seen administration officials more willing to work with business leaders, who are their clients.”


If this is what a thaw looks like, the chilly period sure was balmy. Get ready for a lobbying heat wave in 2011.

Will the Obama team, cowed by coal lobbyists, stand by and let Lisa Jackson get smacked around by the Tea Party thugs in Congress?  If so, who is to be held accountable for the added deaths and impaired lives due to delayed coal pollution control? Congress or Obama himself?

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