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August 03 2012


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

May 24 2011


Former Bush EPA Official Confirms 2004 EPA Fracking Study Was Misused

Ben Grumbles, former assistant Environmental Protection Agency (EPA) administrator and head of the agency’s Office of Water, revealed last week that the conclusions from a 2004 EPA report [pdf] discussing the safety of hydraulic fracturing (a.k.a. fracking) have been exaggerated for years.

In 2004, after a four-year study examining the environmental and safety implications from fracking into coal bed methane reserves, the agency determined that although fracking may release “potentially hazardous chemicals into” drinking water, the drilling process poses “little or no threat” and “does not justify additional study at this time.”

Since 2004, that study has been used as fodder by politicians and the gas industry to justify a massive fracking boom.

Grumbles is now President of the Clean Water America Alliance (a group with no formal position on fracking). He explains [pdf] that the 2004 report did not deem all fracking to be safe. Specifically, the EPA:

…“never intended for the report to be interpreted as a perpetual clean bill of health for fracking or to justify a broad statutory exemption from any future regulation under the Safe Drinking Water Act.”

“A lot has happened since 2005 and, in my view, it makes sense to review the Safe Drinking Water Act landscape as well as the relevance of Clean Water Act programs. Political and legal battles have been growing in state and federal courts and agencies, with particular attention to fracking for shale gas, which is different from fracking for coal bed methane, the primary subject of EPA’s 2004 report.”

This is not the first time that Grumbles has spoken out against industry’s contention that the agency report provided blanket cover to protect frackers from public oversight. In June 2009 and March 2011 interviews with ProPublica he responded to the often-cited claim that fracking received a “clean bill of health” from the EPA:

“When we got the report, it was a snapshot in time. It was a thorough review describing the issues. Whether it's hydraulic fracturing or any other type of practice that can have an impact on the environment, one single report shouldn't be the basis for a perpetual, never-ending policy decision.”

“It wasn't meant to be a bill of health saying 'well, this practice is fine. Exempt it in all respects from any regulation.' I'm sure that wasn't the intent of the panel of experts, and EPA never viewed it that way. That's one reason why we were urging Congress to say 'look, if you are going to issue an exemption, ensure that it is not perpetual.'”

Unfortunately, dirty energy advocates in Congress and the gas industry refer to the study time and again in order to rationalize destructive fracking, regardless of the serious environmental, health and safety consequences.

ProPublica continues to question the scientific merit of that 2004 report and in 2008 drew attention to the fact that some EPA staff engaged in that study had negotiated a deal with Halliburton. Because of the role former U.S. Vice President and Halliburton CEO Dick Cheney played in supporting the exemption, it is known as the “Halliburton Loophole.”

After the report was released, longtime EPA scientist Weston Wilson wrote [pdf] to Colorado representatives stating that "based on available science and literature, EPA’s conclusions are unsupportable." He also identified that five out of seven members of the review panel had conflicts of interest and "may benefit from EPA’s decision not to conduct further investigation or impose regulatory conditions."

Despite Grumbles’ clarifying statement, the gas industry continues to trumpet the EPA study as proof that there was a scientific basis for exempting fracking from the Underground Injection Control provisions of the Safe Drinking Water Act, included in the Cheney-driven 2005 Energy Policy Act.
Read DeSmogBlog’s Special Report: Fracking The Future: How Unconventioanl Gas Threatens Our Water, Health, and Climate [pdf]

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March 29 2011


FRACKING HELL: The True Cost of America's Gas Rush (Video)

I recently re-watched this 18-minute video produced by Britain's Ecologist Film Unit profiling the threats posed by hydraulic fracturing for gas in the Marcellus Shale in the eastern U.S.  It's an excellent primer for anyone who wants to get up to speed on this issue. And, as this piece makes clear, the fracking threat and shale gas boom are not confined to the eastern U.S. by a long shot. 

In addition to the huge gas rush in the U.S. West, as well as in B.C. and elsewhere in Canada, there is a growing industry effort to bring all the pollution and contamination risks of fracking to Europe too - just beginning in the UK, Poland, France and Germany.

The piece outlines the major threats - many recently profiled by the New York Times in its Drilling Down series - from radioactive wastewater, fracking chemicals and other risks to drinking water and public health posed by shale gas development. It explains the devestating toll that gas drilling has had on families and communities across the eastern U.S. region where the shale gas boom is underway, and the consequences of letting this practice gain acceptance throughout the world.

As the LinkTV narrator asks in her preface to their re-run of the video, "The gas business may be booming, but at what price for people?"
Watch the piece to find out some of the costs the gas industry is imposing on local residents affected by the drilling - as well as the enormous risk that shale gas drilling and development poses to the global climate.  Around minute 13, Cornell University expert Anthony Ingraffea briefly explains the findings of his team's research, noting that a full lifecycle analysis of shale gas reveals that it is "at least as dirty as coal." Yeah, so much for that "gas can be a bridge to a renewable future" argument.

Also, don't miss the former Mobil (as in, ExxonMobil) Senior Vice President Lou Allstadt talking about the "insane" proposed rules in New York that would allow gas fracking to occur within 150 feet of a river or lake that supplies drinking water to downstream communities.  Yes, "that's just insane" - straight from the former oil & gas VP's mouth. 

Will the U.S. recognize the dangers and quickly pass the FRAC Act - a preliminary but necessary bill to rein in this industry's reckless drilling practices?  Will the rest of the world recognize the threats posed by fracking in time to avert the damage being done across the U.S.?  The stakes could not be higher, both for the climate and for drinking water supplies.

As one resident impacted by fracking operatins says in the video, "My life is over without my water."

March 23 2011


Texas Commission Defies EPA and Sides with Gas Company Accused of Water Contamination

The Texas Railroad Commission (RRC) voted unanimously on Monday to give the proverbial middle finger to the Environmental Protection Agency. 

The Railroad Commission, the oil and gas regulator for the state of Texas, sided today with a gas industry giant, Range Resources, over a case of drinking water contamination due to an invasive gas drilling process, hydraulic fracturing. The process was made exempt, due to something known as the Halliburton Loophole, from the obligations of the Safe Drinking Water Act (SDWA) after the 2005 Energy Policy Act granted exceptional status to the practice when used for oil and gas drilling. This exemption has hindered the EPA from fully investigating the dangers of hydraulic fracturing and adequately responding to complaints of drinking water contamination.

But when EPA investigations discovered that hydraulic fracturing in the Barnett Shale area of Texas had caused or contributed to drinking water contamination in Parker County, they decided to get heavy handed. The contamination of two private water wells with cancer-causing benzene and explosive methane was enough for the EPA to invoke the SDWA and issue an Imminent and Substantial Endangerment Order to protect the area’s drinking water.<!--break-->

Superseding the authority of the state Commission, on December 7, 2010, the EPA issued the emergency order compelling Range Resources to supply clean drinking water to two families and monitor their homes for methane. In confined spaces, methane can act as an asphyxiant, leading to brain damage or death, and is tremendously explosive.

Both Range Resource and the Commission argue that the contamination originated naturally from the Strawn formation, a shallow bed of underlying rock. The company’s drilling, they say, occurs thousands of feet down, far from the aquifer supplying the homeowner’s water wells.

However, isotopic analyses of the contaminated water suggest that the contamination is related to the nearby drilling. Range Resources, which denied both the accusation and refused to comply with the EPA’s order, was drilling within 30 miles of Forth Worth, the area containing the water wells. Although complaints of water contamination have grown rampant in other states, this is the first official case brought against the gas industry in Texas. The Commission ruled 3-0 in favor of Range Resources, with chairwoman Elizabeth Jones adding that operations “have not and will not contaminate” the homeowners’ water.

This decision lifts the EPA’s order placed on Range Resources, meaning they will not have to deliver potable water, monitor for methane, or conduct further investigations into the cause of the contamination.

State Commissioner Michael Williams told the Associated Press that he sees the EPA’s involvement as a “cavalier attempt by the federal government to reach its arms into our state’s jurisdiction” which he says will “adversely affect the domestic energy industry.” Commissioner Williams will leave his post in April to run as a Republican for the U.S. Senate. 

Sharon Wilson, Texas organizer for Earthwork’s Oil and Gas Accountability Project, told DeSmogBlog yesterday “the EPA seems to be putting the burden of proof back on the industry where it belongs instead of the private citizen. This is an important and necessary step to protect citizens.”

Wilson, who lives atop the Barnett Shale in Texas, says that even if people could afford to test their water, there are still barriers that prevent adequate testing, like chemical disclosure. 

“I know people who have spent tens of thousands on testing, trying to keep their families safe and determine what is in their water. I also know people who can’t afford to test. It’s hard to determine what is in the water or how it got contaminated without knowing what chemicals industry is using. It’s not possible to test for every known chemical.”

The secrecy of chemical components used in hydraulic fracturing operations, like the ones performed by Range Resources, is at present federally condoned. Without federally mandated disclosure there is little to ensure the full public awareness needed to protect affected homeowners. 

The EPA requested a federal court to intervene in January and is still awaiting a court date. According to a reported statement, the EPA “stands by the order issued to Range Resources and seeks to secure Range’s full compliance.” Despite the strong ruling handed down by the state Commission, the EPA is taking an even stronger stance against the decision. The state decision is “not supported by the EPA’s independent, scientific investigation, which concluded that Range Resources Corporation and Range Production Company have contributed to the contamination of homeowner’s drinking water wells” the EPA continued in that statement.

The EPA has also accused the Railroad Commission of failing to adequately respond to the initial complaints over the water contamination. The citizen, ignored by the state, eventually turned to the EPA for help. The EPA, however, failed themselves to properly conduct a full investigation, leaving essential studies unperformed and instead asking Range to conduct them.

Range Resources used this against the EPA, responding to the contamination charge by asking EPA officials to identify the specific pathway the contamination took underground. These types of investigations are burdensome to perform because the underground migration of methane or other contaminants is a notoriously difficult thing to determine. In this specific case, the EPA did not conduct a study to determine the migration pathway the contaminants took, and instead ordered Range to “conduct a study to determine if the exact pathway and cause could be defined.” 

In a recent deposition, EPA official John Belvins said the EPA “doesn’t believe that we need to do the work” because they can legally “ask a company…we believe may have cause or contributed [to water contamination] to do the work, to collect the date, and that’s what we’ve done.”

If the tide of water contamination is to ebb, however, we need a stronger force of oversight, monitoring and enforcement than the EPA has been able to muster. In order for this to happen, federal agencies will need the Congressional backing capable of overturning exemptions and reinstating EPA authority.

According to Wilson, the Texas Sunset Advisory Committee recommends that the Railroad Commission be replaced with a more effective group. “Some people call them industry lap dogs,” she says. “I’ve always called them paid protectors of industry because the commissioners receive huge campaign contributions from the oil and gas industry. I don’t think they even pretend to protect the public or our vital natural resources. Their interest is in promoting Texas energy.”

March 21 2011


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.


January 26 2011


Industry Groups Fight Dirty Against Oscar-Nominated Hydraulic Fracturing Documentary "Gasland"

In the United States and beyond, governments are praising the "clean, plentiful fuel" that is natural gas, and tout it as a viable alternative to oil and coal.  According to Abrahm Lustgarten at ProPublica, its advocates are calling natural gas a step toward a greener energy future due to the fact, they assert, that natural gas produces 50 percent less greenhouse gases than coal. 

Josh Fox's critically-acclaimed documentary Gasland tells quite a different story about the natural gas industry and its extraction process, called hydraulic fracturing, or fracking.  As he journeys across the United States, he discovers the devastating environmental and health impacts of humans and animals in close proximity to gas wells, and realizes that the so-called "Saudi Arabia of natural gas" is causing more pain than it is worth.

After the release of Fox's documentary, an oil and gas lobby group calling itself "Energy In-Depth" launched a public relations offensive against the film (apparently they didn't like the footage of people lighting their tap water on fire).  As it turns out, the website of the lobby group was registered to a Washington, DC public relations firm called FD Americas Public Affairs (formerly FD Dittus Communications) whose clients included oil and gas lobby groups including the American Energy Alliance, run by former Republican staffers Eric Creighton, Kevin Kennedy and Laura Henderson.

Today, when Fox's documentary was nominated for an Academy Award for best documentary feature, a major energy trade association weighed in on Gasland's nomination.  The industry group, the America's Natural Gas Alliance argues on its website that "for our nation's economy" we must make greater use of the "Saudi Arabia of Natural Gas" for the sake of the environment and economy. <!--break-->

The industry group finds the nomination "particularly troubling because natural gas is routinely and safely produced across this country and holds such extraordinary potential to advance our nation's clean energy economy".  ANGA Executive Vice President Tom Amontree went on to argue that natural gas development "can and does exist in harmony with our environment and can play a central role in improving our nation's air quality and solving our energy challenges".

ANGA calls itself "an education and advocacy organization" but represents over 30 North American natural gas exploration and production companies including EnCana, Cabot, Talisman and Apache. According to Andrew Restuccia at The Hill, in an effort to protect the criticism that Gasland mounts against the industry, they've launched a campaign against the documentary, arguing that is exaggerates the side effects of fracking.

They'd better hold their breath though.  According to new findings from the Environmental Protection Agency, natural gas isn't as green as these industry and lobby groups have us think.  When you consider the full life cycle of the gas including the methane and other pollution emitted when gas is extracted and piped to power plants and customers, its environmental footprint skyrockets.  

The EPA’s new analysis doubles its previous estimates it made as recently as April for the amount of methane gas that leaks from loose pipe fittings and is vented from gas wells.  Shockingly, calculations for some gas-field emissions jumped by several hundred percent, and worryingly, methane levels from the hydraulic fracturing of shale gas were 9,000 times higher than previously reported.

The "clean energy future" the fracking operations promise hardly add up given these new findings. 

The EPA found that the equivalent of the annual emissions from 35 million automobiles seep from loose pipe valves or are vented intentionally from gas production facilities into the atmosphere each year.  Gas drilling emissions alone account for at least one-fifth of human-caused methane in the world’s atmosphere, the World Bank estimates, and the EPA expects these emissions to increase dramatically.  And let's not forget that methane is far more potent than other greenhouse gases. 

As the margins of advantage narrow, the political arguments of proponents the industry are becoming more unbelievable.  And, as you might imagine, their PR tactics will only continue to get more extravagant. 

Despite lack of scientific proof of the industry's infallibility as a beacon of green, they're redoubling their PR to try to convince the public of the industry's merits. And they're fighting dirty. 

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