Who gets compensated? Who gets deceived?
As Oil Industry Fights a Tax, It Reaps Subsidies
| The Gulf gusher has triggered research into favors for the “oiligarchy”. We trim, blend, and append three 2010 articles from: (1) New York Times, July 3, on loopholes by David Kocieniewski; (2) CoExist, July 1, on compensation by Pippa Bartolotti; and (3) frequent contributor Joel Hirschhorn on myopia. |
by David Kocieniewski, by Pippa Bartolotti, and Joel S. Hirschhorn
- As Oil Industry Fights a Tax, It Reaps Subsidies
When the Deepwater Horizon drilling platform set off the worst oil spill at sea in American history, it was flying the flag of the Marshall Islands. Registering there allowed the rig’s owner to significantly reduce its American taxes.
The owner, Transocean, moved its corporate headquarters from Houston to the Cayman Islands in 1999 and then to Switzerland in 2008, maneuvers that helped it avoid taxes.
At the same time, BP was leasing the rig to use a tax break for the oil industry to write off 70% of the rent for Deepwater Horizon -- a deduction of more than $225,000 a day since the lease began.
Capital investments like oil field leases and drilling equipment are taxed at an effective rate of 9%, significantly lower than the overall rate of 25% for businesses in general and lower than virtually any other industry.
Because of one lingering provision from the Tariff Act of 1913, many small and midsize oil companies based in the United States can claim deductions for the lost value of tapped oil fields far beyond the amount the companies actually paid for the oil rights.
Another provision a half-century old lets oil companies subtract royalty payments to foreign governments from their American tax bills.
The oil and natural gas industry has spent $340 million on lobbyists since 2008.
Senator Robert Menendez, Democrat of New Jersey, works alongside the Obama administration on a bill that would cut $20 billion in oil industry tax breaks over the next decade. Mr. Menendez said he believed the Gulf spill was devastating enough to spur Congress into action.
But one notable omission in his bill shows the vast reach of the industry. While the legislation would cut many incentives over the next decade, it would not touch the tax breaks for oil refineries. They operate in his home state, New Jersey.
JJS: Some benefit from oil, others suffer.
- Who Compensates the Planet?
BP have put $20 billion into a compensation fund for those affected by the Gulf of Mexico spillage, and that is just for starters. Americans living many miles away from the disaster, and who are barely affected by it, are putting in claims for compensation.
During the 1991 Gulf War, the Iraqi Army destroyed tankers, oil terminals, and oil wells in Kuwait, causing the release of 900,000,000 barrels of oil -- the largest oil spill in history. There was no shoreline cleanup and the oil lakes which formed were left untreated. The long-term effects were significant and heavy pollution remains in the desert and on the seabed. Nonetheless, Kuwaiti companies and individuals were awarded over $52 billion.
By contrast, in Nigeria a non-violent campaign -- the Movement for the Survival of the Ogoni People -- attempted to claim compensation for those whose health and livelihood had been destroyed. In the last 50 years at least 9 million barrels of oil have leaked into land and rivers in the region; the true figure could be much higher. Members of the Movement were arrested, hastily tried by a special military tribunal, and hanged.
The amount compensated seems to be decided only by one’s relative wealth. The poorest get nothing. Indeed they are fortunate to escape with their lives.
In a shrinking world our neighbors are everyone. Their environmental disaster is our warning. The more we support our global neighbor, the less likely we will be befouled.
JJS: If only we could consider the big picture in both space and time.
- Time Blindness
A loss expected to happen next year looks smaller than that same loss happening next week. A catastrophe that may happen (indeed, is highly likely to happen) decades away is unworthy of attention now. In other words, humans suffer from an intrinsic defect best described as time blindness -- the inability to correctly foresee and take seriously long-term consequences of current actions.
Technologies that offer immediate benefits are embraced while long-term negative impacts are ignored. Maybe cell phones really do cause brain cancer. Maybe deep-ocean drilling for oil will cause exactly what we are now witnessing in the Gulf of Mexico.
But we like cell phones, and we refuse to take the many actions to end our addiction to petroleum. In other words, near-term benefits blind us to long-term costs. As economists say, long-term costs are heavily discounted.
Some people know how to take advantage of mass time blindness. Think of all the Ponzi schemes that have victimized many people out of billions of dollars. By the time that negative impacts occur it startles people as if they could not have been predicted. Wrong! In all cases there is always a record of some people correctly forecasting the crisis. But they are ignored.
Take population: Too many humans on planet Earth using too many resources. Also think global climate change. Though there are clear impacts now, major calamities will become future shocks because of our time blindness.
The real lesson of the BP oil disaster: We need to understand time blindness as a mental disability, and teach people to avoid it. One person has been doing just that for decades. Check out the work of Jack Alpert at skil.org.
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Editor Jeffery J. Smith runs the Forum on Geonomics.
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