SCHUMER PUSHES NEW LEGISLATION TO REPEAL TAX GIVEAWAYS TO OIL COMPANIES - BIG OIL RAKING IN RECORD PROFITS AND HUGE TAX BREAKS WHILE GAS PRICES DRAIN UPSTATE NYERS' BANK ACCOUNTS
Oil Companies Receive $4 Billion Every Year In Tax Breaks, All While Raking In Record Profits With Gas Prices At Unprecedented Highs
Average Gas Prices Per Gallon Are $4.09 In Central NY, $4.07 In The Capital Region, $4.06 In The Southern Tier
Schumer: These Funds Should Go To Pay Down The Deficit, Not Into Big Oil CEO Pockets
Earlier this week, U.S. Senator Charles E. Schumer announced his support for the Close Big Oil Tax Loopholes Act, introduced this week, that would repeal the $4 billion annual tax breaks to the largest oil companies. Schumer's call for the repeal of the wasteful tax breaks comes while the average price of gas in New York State continues to hover above $4 per gallon and shortly after several oil companies reported huge profits in the first quarter of this year. While Upstate New Yorkers are paying record amounts for a trip to the gas station, Exxon raked in its best quarter since 2008, and BP saw its profits jump 17%, to $7.1 billion in just the first quarter alone. The industry is heavily subsidized, and the oil companies themselves admit that the tax breaks are unnecessary, and do nothing to encourage domestic exploration and drilling for oil.
"Just as the economy is starting to turn the corner, Upstate New Yorkers are being pummeled with $4 per gallon gas prices every time they head to the pump," Schumer said. "And at the same time, the oil companies charging these exorbitant prices are picking through New Yorkers' pockets through the tax code, collecting billions of dollars every year in unnecessary taxpayer subsidies. This is completely unacceptable, and those Big Oil companies should know that the jig is up. Tax breaks should be focused on supporting middle class families, not lining Big Oil's pockets. We are going to save billions over the next ten years, which can be put to use paying down our deficit, instead of leading to fatter paychecks and bigger bonuses for oil executives."
Senator Schumer joined several colleagues to introduce the Close Big Oil Tax Loopholes Act, which will put an end to taxpayer handouts to the 5 largest oil companies making record profits, and use the billions in savings to help reduce the deficit. As oil companies push gas prices to $4 dollars a gallon, their profits have skyrocketed; Exxon just reported its best quarter since 2008, with profits skyrocketing by 69% over last year, to $10.7 billion, and even BP saw its profits increase by 17% to $7.1 billion dollars. Shell pulled in $8.8 billion, up 60% from a year before, Conoco Phillips earned $3 billion, up over 40% from the year before, and Chevron earned $6.2 billion for the first quarter of this year. Schumer notes that over the last ten years, the five major oil companies have reaped nearly $1 trillion in profits, all while taking advantage of massive tax loopholes to further line their pockets. Oil production is a heavily subsidized industry in the U.S., with taxpayers giving away more the $4 billion in tax breaks to Big Oil every year.
Schumer also highlighted that Big Oil spends the vast majority of their profits not on drilling for more oil, but on paying their CEOs. From 2005 to 2009, less than 10 percent of after-tax profits went to exploration for new oil fields, and in just the last 12 months, the value of the Exxon stock held by CEO R.W. Tillerson rose by $32 million.
A region by region breakdown of average gas prices per gallon throughout New York appears below:
- In the Capital Region, the average price of gas is $4.07 a gallon, a year-over-year increase of 36%.
- In the Western New York, the average price of gas is also $4.07 a gallon, a year-over-year increase of 33%.
- In the Rochester-Finger Lakes Region, the average price of gas is $4.06 a gallon, a year-over-year increase of 34%.
- In the Southern Tier, the average price of gas is $4.06 a gallon, too, a year-over-year increase of 34%.
- In Central New York, the average price of gas is $4.03 a gallon, a year-over-year increase of 33%.
- In the Mohawk Valley, the average price of gas is $4.09, a year-over-year increase of 35%.
- In the Hudson Valley, the average price of gas is about $4.20, an estimated year-over-year increase of 35%,
- In the North Country, the average price of gas is an estimated $4.17, an estimated year-over-year increase of 36%.
Summary of Close Big Oil Tax Loopholes Act:
Modifications of foreign tax credit rules applicable to major integrated oil companies which are dual capacity taxpayers.
U.S. taxpayers are taxed on their income worldwide, but are entitled to a dollar-for-dollar tax credit for any income taxes paid to a foreign government. U.S. oil and gas companies have been accused of disguising royalty payments to foreign governments as foreign taxes. This allows them to lower their taxes in the U.S. The bill would close this loophole that amounts to a U.S. subsidy for foreign oil production for the Big 5.
Limitation on deduction for income attributable to the production of oil, natural gas, or primary products thereof.
In 2004 Congress enacted Section 199, the domestic manufacturing tax deduction. In 2008 Congress froze the Section 199 deduction at 6% for all oil and gas activity. The bill eliminates the Section 199 deduction for the Big 5.
Limitation on deduction for intangible drilling and development costs.
Would deny the Big 5 oil companies the option of expensing Intangible Drilling Costs (IDCs) and require such costs be capitalized. IDCs are expenditures such as wages, fuel, repairs, hauling, and supplies necessary for the drilling of oil wells. Currently, integrated oil companies can expense 70% of the cost of IDCs. The bill requires the Big 5 to capitalize all of its IDC costs.
Limitation on percentage depletion allowance for oil and gas wells.
Firms that extract oil and gas are permitted a deduction to recover their capital investment under one of two methods. Cost depletion allows for the recovery of the actual capital investment--the costs of discovering, purchasing, and developing the well--over the period the well produces income. Under this method, the taxpayer's total deductions cannot exceed its original investment.
Percentage depletion allows the cost recovery to be computed using a percentage of the revenue from the sale of the oil or gas. Under this method, total deductions could (and often do) exceed the taxpayer's capital investment. The bill repeals percentage depletion for the Big 5.
Limitation on deduction for tertiary injectants.
Tertiary injectants are used in enhanced oil recovery to drive more oil from an existing well. Currently, oil companies are allowed to deduct the cost of tertiary injectants rather than capitalizing their costs and recovering them over time. The bill requires the Big 5 to capitalize the cost of tertiary injectants it uses during the year and recover those costs over time.
Repeal of Outer Continental Shelf deep water and deep gas royalty relief
Repeals Sections 344 and 345 of the Energy Policy Act of 2005. Section 344 extended existing deep gas incentives and Section 345 provided additional mandatory royalty relief for certain deepwater oil and gas production. These changes will help ensure that Americans receive fair value for Federally-owned fossil fuel resources.
Deficit Reduction
All savings realized as the result of the bill's elimination of the tax breaks and other subsidies currently going to the major integrated oil companies are devoted to deficit reduction.
Senator Schumer's support of this bill comes as he continues fighting to reduce the price of gas. Since January 2011, Schumer has called on President Obama to deploy the Strategic Petroleum Reserve (SPR) to offset ballooning gas prices. The SPR holds in excess of 700 million barrels of oil, and Schumer urged that 4.4 million barrels be released to help stabilize markets. Senator Schumer has cosponsored two other recent pieces of legislation to lower gas prices for New Yorkers. First, the No Oil Producing and Exporting Cartels Act (NOPEC), to permit the Dept. of Justice to bring actions against foreign states for collusive practices in oil pricing and production. Second, the Use It or Lose It Act of 2011, which would force companies to report how they plan to use millions of federal acres already under lease for energy exploration and innovation, specifically aimed at those oil companies who are leasing, but failing to develop and produce oil on these lands.