When Congress sought to support a tanking economy and stem its job hemorrhage as the pandemic spread last year, the oil industry was among those seeking relief. Now, new analysis shows dozens of fossil fuel companies received billions of dollars in tax breaks under the coronavirus relief program, but still cut tens of thousands of jobs.
As Congress ended up sending billions in direct loans to businesses large and small, a significant portion of the benefits of the CARES Act came in the form of tax code changes. At least 77 fossil fuel companies took the opportunity to claim a total of $ 8.2 billion in benefits last year, even as they cut nearly 60,000 jobs, according to an analysis published Friday by BailoutWatch, a non-profit organization supported by Rockefeller Philanthropy Advisors.
Chris Kuveke, an analyst with BailoutWatch, said the data shows that aid to the industry has not delivered the benefits Congress hoped.
“These companies did not use the money they received through the CARES law to maintain the payroll,” he said.
As oil prices plummeted last year, some energy companies began to pressure Congress and the federal government for various forms of assistance. Occidental Petroleum, for example, has asked its employees to send letters to members of Congress asking them to “provide liquidity” to the energy industry, according to Bloomberg News.
Among the various forms of stimulus included in the final relief plan were changes to the tax code that have proven to be beneficial for the oil industry.
For example, for years companies have been allowed to “carry forward” their losses one year to offset profits from previous years and get a retroactive tax refund. This allowance helped companies with volatile profits, but it was wiped out by the 2017 tax cuts enacted by President Donald Trump. The change was one of the few provisions in the tax overhaul that slightly increased the tax burden on corporations, even as the bill drastically reduced corporate taxes, said Thornton Matheson, senior researcher at Urban-Brookings. Tax Policy Center.
The CARES Act removed this change and even extended the original provision, allowing businesses to carry losses incurred between 2018 and 2020 back five years, instead of the two years allowed before the 2017 tax bill. Matheson has said the oil and gas industry was among the few likely to benefit the most from this part of the CARES Act, as its revenues can fluctuate wildly with commodity prices.
Thus, the change allowed companies to extend their losses from 2018 to 2013, when oil prices were above $ 100 a barrel and some of them ‘profits were very high (prices fell sharply at the end of the year. 2014 and have not fully recovered).
According to BailoutWatch’s analysis, Marathon Petroleum, one of the major refiners, profited the most, according to the analysis, claiming $ 2.1 billion in tax benefits. The company cut nearly 2,000 jobs last year, not counting those in its retail business.
Marathon disputed that figure, saying less than 30% of its $ 2.1 billion tax benefit was due to the provisions of the CARES Act. However, its annual securities deposit stated that based on the carryback “as provided by the CARES Act, we recorded an income tax claim of $ 2.1 billion” to reflect the company’s estimate of the refund it expected to receive in his 2020 tax return.
Marathon spokesman Jamal T. Kheiry said some of the layoffs were associated with refinery idling, and added that the company was generous with employees who lost their jobs. “To help affected employees make the transition, we have provided severance, bonuses, extended health care benefits at employee rates, job placement assistance, counseling and other arrangements,” a- he declared.
NOV, a drilling company, cut nearly 8,000 workers, or more than 20% of its employees, despite a tax benefit of $ 591 million. The company did not respond to a request for comment.
Occidental raised $ 195 million and cut 2,600 jobs.
Eric P. Moses, spokesperson for Occidental, said the job cuts were associated with its acquisition of Anadarko Petroleum in 2019 “and completed before the COVID pandemic and congressional passage of the CARES law “.
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In March 2020, Occidental announced this would reduce some employee salaries, with the highest cuts go to senior executives, according to Reuters. Two months later, Reuters reported the company was asking employees to make voluntary buyouts.
In total, BailoutWatch estimated in November that fossil fuel companies had received between $ 10.4 billion and $ 15.2 billion in direct benefits from various CARES law programs, and that this total only reflected the $ 5.5 billion in reported tax benefits at this moment.
The oil and gas industry faced a historic fiscal crisis last year, as oil prices plummeted and global travel came to a halt. In response, the US oil and gas industry cut more than 100,000 jobs in November of last year, a drop of 16%, according to BW Research Partnership.
Unlike the Paycheck Protection Program, companies that claimed the tax benefits were not required to keep their employees on their payroll. Matheson, of the Urban-Brookings Center, said the purpose of the tax changes was not to keep jobs, but to help businesses improve their cash flow as revenues dwindle.
She said the United States, compared to other developed countries, was spending more of its pandemic relief on this type of business aid than on job maintenance.
“You can question both the size of these measures and their effectiveness,” she said. “Are these tax breaks something we want to give to big businesses, or do we want to focus them on small businesses? “
Kuveke said if companies had focused on keeping jobs, they might have chosen to cut costs elsewhere. Marathon, for example, increased its dividend in January 2020, and kept it at that level as the pandemic spread, rewarding shareholders instead of keeping jobs.
Stephen Comstock, vice president of corporate policy at the American Petroleum Institute, said that “the CARES law, which was passed with strong bipartisan support, has brought critical relief to businesses in the economy facing financial difficulties due to the pandemic “.
For example, companies in other sectors have also benefited from the carry-back provision. “It is unfortunate that some have chosen to exploit this crisis and distort the facts in order to advance a partisan agenda,” he said.
BailoutWatch’s analysis comes as the oil and gas industry pushes back the Biden administration’s efforts to move the country’s energy system away from fossil fuels. While the industry and its allies in Congress have warned that Biden’s policies will cost jobs, the number of people employed in the oil and gas extraction industry – which covers drilling but not pipelines, refining or other parts of the industry – had in fact sharply dropped from the 2014 peak, even as oil and gas production increased, according to federal data.
Wednesday, Biden announced he would seek to eliminate subsidies and tax benefits for the oil and gas industry, estimated at tens of billions of dollars a year, as part of its infrastructure proposals.
American Petroleum Institute responded in a press release that the industry “does not benefit from any special tax treatment”.
But Kuveke said his analysis showed the claim to be spurious. While the deferral changes he analyzed are not specific to the oil industry, he said, they show that tax provisions can favor particular industries even if they are not explicitly targeted.
“They only benefit from oil and gas,” he said.