Norway Plans to Raise Taxes on Oil Companies

OSLO - Norwegian Prime Minister Jens Stoltenberg, who faces an election in September, on Sunday laid out plans for a modest tax cut for mainland businesses while increasing taxes on oil companies and multinationals, as the small Nordic nation looks to maintain a competitive business climate.

Mr. Stoltenberg's plan, part of the government budget presentation on Tuesday, includes a reduction in the general corporate tax to 27% from 28% starting in 2014.

The move is expected to shave 2.4 billion kroner ($413 million) off the annual tax bill for mainland industry, as well as NOK500 million annually for those who are self-employed, the government said. Lawmakers will vote on the budget, but Mr. Stoltenberg's ruling coalition has enough votes to pass it.

Neighboring Sweden recently cut its corporate-tax rate to 22%, and Denmark plans to reach the same level by 2016. Finland, meanwhile, is aiming to take its tax rate at 20%.

Norway's oil-and-gas industry has helped keep unemployment low, public finances intact and wages rapidly growing. While this has insulated Norway from much of Europe's economic malaise, it has forced many companies outside the energy sector to be noncompetitive.

"Some sectors are performing very well, pushing prices and salaries higher," Mr. Stoltenberg said at a news conference. "At the same time, businesses that can't increase prices because they depend on global markets are squeezed by high costs and lower demand from abroad."

Norway's wage growth is expected to slow to 3.5% in 2013, but is still high enough to erode the competitiveness of companies in the international market.

Oil companies won't benefit from the tax cut, the government said, because it will be offset by an increase in the special petroleum tax to 51% from 50%.

Mr. Stoltenberg criticized oil companies for cost overruns on big projects, and said they would have to pay a bigger share of the investments from now on.

"We think we give a better signal to the oil companies when they must now bear a bigger share of the investments themselves, not the least because we need more cost awareness in that sector," he said.

The 24 oil projects under development offshore Norway have recorded cost overruns of NOK49 billion, government figures show. Mr. Stoltenberg said "90% of this is paid for by the society."

Oil companies would still be able to deduct most of their investment costs, but slightly less than before. By reducing a tax deduction called the "uplift," oil companies' tax bill was expected to increase by NOK70 billion in current value between 2013 and 2050, the government said, or slightly below NOK3 billion annually.

Norway's dominant oil company, Statoil ASA, wasn't available for comment Sunday.

The Norwegian Oil and Gas Association said it worried the changes could undermine Norway's reputation as a stable environment for oil-company investments, and warned that marginally profitable oil and gas projects could be shelved.

Amid a high oil price, some offshore projects "have a pretty high break-even price," association spokesman Erling Kvadsheim told The Wall Street Journal. "I don't think this measure in itself will necessarily affect those, but some of the more expensive projects to increase the oil recovery [on mature fields] may be impacted."

Some of the bill for the tax cuts would go to big corporations. The government said it planned to reduce multinational companies' ability to shift profit into low-tax countries from Norway through internal loans. Lowering interest deductions on such loans would increase tax revenue by NOK3 billion annually, the government said.

In addition, a higher tax rate on people who own more than one home would increase Norway's tax revenue by an additional 500 million kroner annually, the government said.

Copyright (c) 2013 Dow Jones & Company, Inc.

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Norway Plans to Raise Taxes on Oil Companies

OSLO - Norwegian Prime Minister Jens Stoltenberg, who faces an election in September, on Sunday laid out plans for a modest tax cut for mainland businesses while increasing taxes on oil companies and multinationals, as the small Nordic nation looks to maintain a competitive business climate.

Mr. Stoltenberg's plan, part of the government budget presentation on Tuesday, includes a reduction in the general corporate tax to 27% from 28% starting in 2014.

The move is expected to shave 2.4 billion kroner ($413 million) off the annual tax bill for mainland industry, as well as NOK500 million annually for those who are self-employed, the government said. Lawmakers will vote on the budget, but Mr. Stoltenberg's ruling coalition has enough votes to pass it.

Neighboring Sweden recently cut its corporate-tax rate to 22%, and Denmark plans to reach the same level by 2016. Finland, meanwhile, is aiming to take its tax rate at 20%.

Norway's oil-and-gas industry has helped keep unemployment low, public finances intact and wages rapidly growing. While this has insulated Norway from much of Europe's economic malaise, it has forced many companies outside the energy sector to be noncompetitive.

"Some sectors are performing very well, pushing prices and salaries higher," Mr. Stoltenberg said at a news conference. "At the same time, businesses that can't increase prices because they depend on global markets are squeezed by high costs and lower demand from abroad."

Norway's wage growth is expected to slow to 3.5% in 2013, but is still high enough to erode the competitiveness of companies in the international market.

Oil companies won't benefit from the tax cut, the government said, because it will be offset by an increase in the special petroleum tax to 51% from 50%.

Mr. Stoltenberg criticized oil companies for cost overruns on big projects, and said they would have to pay a bigger share of the investments from now on.

"We think we give a better signal to the oil companies when they must now bear a bigger share of the investments themselves, not the least because we need more cost awareness in that sector," he said.

The 24 oil projects under development offshore Norway have recorded cost overruns of NOK49 billion, government figures show. Mr. Stoltenberg said "90% of this is paid for by the society."

Oil companies would still be able to deduct most of their investment costs, but slightly less than before. By reducing a tax deduction called the "uplift," oil companies' tax bill was expected to increase by NOK70 billion in current value between 2013 and 2050, the government said, or slightly below NOK3 billion annually.

Norway's dominant oil company, Statoil ASA, wasn't available for comment Sunday.

The Norwegian Oil and Gas Association said it worried the changes could undermine Norway's reputation as a stable environment for oil-company investments, and warned that marginally profitable oil and gas projects could be shelved.

Amid a high oil price, some offshore projects "have a pretty high break-even price," association spokesman Erling Kvadsheim told The Wall Street Journal. "I don't think this measure in itself will necessarily affect those, but some of the more expensive projects to increase the oil recovery [on mature fields] may be impacted."

Some of the bill for the tax cuts would go to big corporations. The government said it planned to reduce multinational companies' ability to shift profit into low-tax countries from Norway through internal loans. Lowering interest deductions on such loans would increase tax revenue by NOK3 billion annually, the government said.

In addition, a higher tax rate on people who own more than one home would increase Norway's tax revenue by an additional 500 million kroner annually, the government said.

Copyright (c) 2013 Dow Jones & Company, Inc.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

View the original article here

API: TV Ads Show Americans Don't Support Higher Industry Taxes

New TV ads show Americans don't support higher taxes on the oil and natural gas industry, API Executive Vice President Marty Durbin told reporters in a briefing Wednesday morning:

"Starting today, the API is running ads on broadcast and cable channels that feature the unscripted words of everyday Americans who believe higher taxes on energy companies may translate into higher energy costs for consumers. We decided to run the ads to remind Congress that at a time when many families have had to scramble to balance their budgets, asking them to pay more for the energy they need to live their lives is bad policy and frankly bad politics.

"According to a study by Wood Mackenzie a $5 billion per year tax increase would result in a decrease of $233 billion in revenue to federal, state and local governments by 2030. Further, the study estimates that increased investments, as a result of pro-growth and energy development policies, could generate an additional $800 billion in revenue by 2030. That's a $1 trillion difference to government's bottom line.

"If increased revenue is truly the objective [of those proposing to increase taxes on the industry], then allow the oil and natural gas industry to continue to do what it has always done – invest in America's economy by providing good-paying jobs here at home that develop the energy America needs. That's what the American people support and in the long-term the result would be far better for the American economy, for consumers, for our energy security, and for the nation's long-term economic growth."

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

View the original article here

API: TV Ads Show Americans Don't Support Higher Industry Taxes

New TV ads show Americans don't support higher taxes on the oil and natural gas industry, API Executive Vice President Marty Durbin told reporters in a briefing Wednesday morning:

"Starting today, the API is running ads on broadcast and cable channels that feature the unscripted words of everyday Americans who believe higher taxes on energy companies may translate into higher energy costs for consumers. We decided to run the ads to remind Congress that at a time when many families have had to scramble to balance their budgets, asking them to pay more for the energy they need to live their lives is bad policy and frankly bad politics.

"According to a study by Wood Mackenzie a $5 billion per year tax increase would result in a decrease of $233 billion in revenue to federal, state and local governments by 2030. Further, the study estimates that increased investments, as a result of pro-growth and energy development policies, could generate an additional $800 billion in revenue by 2030. That's a $1 trillion difference to government's bottom line.

"If increased revenue is truly the objective [of those proposing to increase taxes on the industry], then allow the oil and natural gas industry to continue to do what it has always done – invest in America's economy by providing good-paying jobs here at home that develop the energy America needs. That's what the American people support and in the long-term the result would be far better for the American economy, for consumers, for our energy security, and for the nation's long-term economic growth."

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

View the original article here

Raising Energy Taxes – The Wrong Approach

Update: The U.S. Senate failed to reach the 60 votes needed to invoke cloture and the motion failed 51-47. (29 Mar 2012)

Today the Senate will vote to advance S.2204 sponsored by Sen. Menendez (D-NJ). This bill will raise taxes on major integrated oil and natural gas companies to subsidize other forms of energy and will do absolutely nothing to lower gasoline prices.

A new poll conducted by Harris Interactive, from March 9-13 of registered voters nationwide, found that 76% of voters believe that increasing energy taxes could increase consumer costs on a wide variety of products, including higher gasoline prices.

American voters overwhelming oppose higher taxes!

Additionally, this bill claims to end alleged “subsidies” for a handful of oil and natural gas companies. However, nothing could be further from the truth. The U.S. oil and natural gas industry does not receive “subsidized” payments from the government to produce oil and gas. In fact, the Wall Street Journal editorial board states “the truth is that this industry is subsidizing the government.” The US oil and natural gas industry on average pays over $86 million every day to the federal government in taxes, rents, royalties and lease payments.

U.S. oil and natural gas companies pay considerably more of its profits in taxes than the average manufacturing company. In fact, in 2010, the industry paid more in total taxes than any other industry sector while averaging a 41% effective tax rate. Also in 2010, oil and natural gas companies directly contributed over $470 billion to the U.S. economy in spending, wages, and dividends – more than half the size of the 2009 federal stimulus package ($787 billion) – only this stimulus didn’t require an act of Congress.

Below are more details on the specific negative effects of the tax provisions that are included in the Menendez bill:

Dual Capacity/Foreign Tax Credit denial: API’s one pager discussing how this will make American companies uncompetitive abroad is here and there are more in-depth studies on this topic here, here and here. Despite rhetoric, the provision they seek to modify ironically is a more stringent rule on taxpayers like the oil and gas industry that has, for the last 3 decades, ensured abuses do not occur. The foreign tax credit can only be used to offset foreign income taxes paid and not any other payment. Without this foreign tax credit, which has been in place since 1918, US-based companies would be substantially disadvantaged when trying to develop foreign opportunities. Specifically, companies would face the cost of double taxation on foreign operations, while their competitors would only be taxed once.Sec. 199 repeal: Section 199 is available to every single domestic manufacturer and extractive industry that qualifies and is in no way unique to the oil and gas industry. As seen here, the oil and gas industry is already penalized with respect to others as we receive a 6% deduction on income from qualified activities; everyone else receives a 9% deduction. This provision was put into place in the American Jobs Creation Act in 2004 to create and keep jobs in the U.S. – exactly what we are doing. We support 9.2 million jobs in the U.S. and contribute to 7.7% of GDP. By removing this provision from just a handful of companies it sends the message a job in the oil and gas industry is not as “valuable” as a job at Starbucks or the New York Times (both of whom get 199 at 9%). Studies have shown repealing Sec. 199 (and IDC below) for the entire industry could put 165,000 direct/indirect jobs at risk by 2020.Repeal of drilling cost deduction (IDCs): Just like the R&D deduction (comparison here) our companies can deduct costs associated with the labor and construction of a well. As you can see in this one-pager, these costs, typically 60-80% of the cost of a well, are simply cost recovery with respect to timing – there is no credit or government subsidy here. Cost recovery allows us to put that money back into projects, technology and high wages. The average upstream wage is approx $98,000/yr. This provision is not unique to the Code and could compromise thousands of jobs and billions of dollars worth of capital – in fact, this repeal along with (Sec. 199 above) could compromise 10% of America’s oil and gas production capacity by 2017.Percentage depletion: The major integrated US oil and gas companies (the target of this amendment) are not eligible for percentage depletion and have not been for over 30 years. IPAA has more on how this affects independent producers.Repeal of tertiary injectant deduction: The U.S. is a mature oil producing region but still contains many viable fields whose lives are extended through the use of tertiary injectants. These efforts secure additional U.S. production and enable many production companies to remain in business. Changing how these costs are recovered could force producers to shut in older fields and significantly impact local economies. This deduction supports using carbon dioxide in enhanced oil recovery projects, one of the primary methods by which carbon dioxide is currently stored to prevent its release into the atmosphere.

Without unfair and punitive tax increases and unnecessary new regulations - we could create 1 million more new jobs in just seven years and increase revenue to the government by $127 billion by 2020. By 2030, this program of development could boost government revenue by $800 billion and increase daily production of oil and natural gas by 10 million barrels. Add to this more imports from Canada and increased domestic bio-fuel use and we could within 15 years have the capability to secure all of our liquid fuels from North American sources.

America’s oil and natural gas companies are owned by tens of millions of Americans. More than 29 percent of shares are held in mutual funds; 27 percent are held in pension funds; 23 percent are owned by individual investors; 14 percent are held in IRAs. Five percent are held by institutions and only 1.5 percent of industry shares are owned by corporate management. Raising taxes on America’s energy producers, businesses, and retirement plans is the wrong approach to rebuilding our economy. Therefore, these tax increases are nothing more than a billion dollar tax increase on America’s oil and natural gas industry, our employees, and our nation’s retirees.

View the original article here

Raising Energy Taxes – The Wrong Approach

Update: The U.S. Senate failed to reach the 60 votes needed to invoke cloture and the motion failed 51-47. (29 Mar 2012)

Today the Senate will vote to advance S.2204 sponsored by Sen. Menendez (D-NJ). This bill will raise taxes on major integrated oil and natural gas companies to subsidize other forms of energy and will do absolutely nothing to lower gasoline prices.

A new poll conducted by Harris Interactive, from March 9-13 of registered voters nationwide, found that 76% of voters believe that increasing energy taxes could increase consumer costs on a wide variety of products, including higher gasoline prices.

American voters overwhelming oppose higher taxes!

Additionally, this bill claims to end alleged “subsidies” for a handful of oil and natural gas companies. However, nothing could be further from the truth. The U.S. oil and natural gas industry does not receive “subsidized” payments from the government to produce oil and gas. In fact, the Wall Street Journal editorial board states “the truth is that this industry is subsidizing the government.” The US oil and natural gas industry on average pays over $86 million every day to the federal government in taxes, rents, royalties and lease payments.

U.S. oil and natural gas companies pay considerably more of its profits in taxes than the average manufacturing company. In fact, in 2010, the industry paid more in total taxes than any other industry sector while averaging a 41% effective tax rate. Also in 2010, oil and natural gas companies directly contributed over $470 billion to the U.S. economy in spending, wages, and dividends – more than half the size of the 2009 federal stimulus package ($787 billion) – only this stimulus didn’t require an act of Congress.

Below are more details on the specific negative effects of the tax provisions that are included in the Menendez bill:

Dual Capacity/Foreign Tax Credit denial: API’s one pager discussing how this will make American companies uncompetitive abroad is here and there are more in-depth studies on this topic here, here and here. Despite rhetoric, the provision they seek to modify ironically is a more stringent rule on taxpayers like the oil and gas industry that has, for the last 3 decades, ensured abuses do not occur. The foreign tax credit can only be used to offset foreign income taxes paid and not any other payment. Without this foreign tax credit, which has been in place since 1918, US-based companies would be substantially disadvantaged when trying to develop foreign opportunities. Specifically, companies would face the cost of double taxation on foreign operations, while their competitors would only be taxed once.Sec. 199 repeal: Section 199 is available to every single domestic manufacturer and extractive industry that qualifies and is in no way unique to the oil and gas industry. As seen here, the oil and gas industry is already penalized with respect to others as we receive a 6% deduction on income from qualified activities; everyone else receives a 9% deduction. This provision was put into place in the American Jobs Creation Act in 2004 to create and keep jobs in the U.S. – exactly what we are doing. We support 9.2 million jobs in the U.S. and contribute to 7.7% of GDP. By removing this provision from just a handful of companies it sends the message a job in the oil and gas industry is not as “valuable” as a job at Starbucks or the New York Times (both of whom get 199 at 9%). Studies have shown repealing Sec. 199 (and IDC below) for the entire industry could put 165,000 direct/indirect jobs at risk by 2020.Repeal of drilling cost deduction (IDCs): Just like the R&D deduction (comparison here) our companies can deduct costs associated with the labor and construction of a well. As you can see in this one-pager, these costs, typically 60-80% of the cost of a well, are simply cost recovery with respect to timing – there is no credit or government subsidy here. Cost recovery allows us to put that money back into projects, technology and high wages. The average upstream wage is approx $98,000/yr. This provision is not unique to the Code and could compromise thousands of jobs and billions of dollars worth of capital – in fact, this repeal along with (Sec. 199 above) could compromise 10% of America’s oil and gas production capacity by 2017.Percentage depletion: The major integrated US oil and gas companies (the target of this amendment) are not eligible for percentage depletion and have not been for over 30 years. IPAA has more on how this affects independent producers.Repeal of tertiary injectant deduction: The U.S. is a mature oil producing region but still contains many viable fields whose lives are extended through the use of tertiary injectants. These efforts secure additional U.S. production and enable many production companies to remain in business. Changing how these costs are recovered could force producers to shut in older fields and significantly impact local economies. This deduction supports using carbon dioxide in enhanced oil recovery projects, one of the primary methods by which carbon dioxide is currently stored to prevent its release into the atmosphere.

Without unfair and punitive tax increases and unnecessary new regulations - we could create 1 million more new jobs in just seven years and increase revenue to the government by $127 billion by 2020. By 2030, this program of development could boost government revenue by $800 billion and increase daily production of oil and natural gas by 10 million barrels. Add to this more imports from Canada and increased domestic bio-fuel use and we could within 15 years have the capability to secure all of our liquid fuels from North American sources.

America’s oil and natural gas companies are owned by tens of millions of Americans. More than 29 percent of shares are held in mutual funds; 27 percent are held in pension funds; 23 percent are owned by individual investors; 14 percent are held in IRAs. Five percent are held by institutions and only 1.5 percent of industry shares are owned by corporate management. Raising taxes on America’s energy producers, businesses, and retirement plans is the wrong approach to rebuilding our economy. Therefore, these tax increases are nothing more than a billion dollar tax increase on America’s oil and natural gas industry, our employees, and our nation’s retirees.

View the original article here

Itching for Floor Fight Over Higher Energy Taxes

Why did energy supporters in the U.S. Senate stand aside to allow consideration of legislation they oppose – raising taxes on America’s oil and natural gas companies? After all, there were more than enough votes to keep the proposal from coming to the floor.

Simple, in politics you choose the fights you think you can win, and Senate opponents of higher energy taxes feel like they’ve got the American people behind them.

Here’s why. A spate of surveys shows that strong majorities of Americans favor more production of oil and natural gas here at home. Both Gallup and Rasmussen have new polls showing Americans support construction of the Keystone XL pipeline, which would bring up to 830,000 barrels of oil per day from neighbor and ally Canada. Another Rasmussen survey indicates 2-1 support for developing energy from shale via hydraulic fracturing.

Then there was a Pew Research Center poll that suggests the reason for the findings in the others. Pew found that as gasoline prices rise, so does Americans’ interest in greater oil and natural gas production.

A Harris Interactive poll ties things together: It found 76 percent of voters nationwide believe higher taxes on the country’s energy producers could cost them more at the gas pump – which the Congressional Research Service substantiated in a report last year.

Americans’ reaction to increasing fuel costs – driven higher by the rising cost of crude on the global market – is understandable. They’re saying let’s have policies and strategies that could put downward pressure on crude supply as opposed to policies that would make energy producers’ operations costlier – potentially reducing exploration, development and production while elevating prices.

Thus, a Senate debate that supporters of more oil and natural gas production are eager for the American people to see and hear.

View the original article here

Itching for Floor Fight Over Higher Energy Taxes

Why did energy supporters in the U.S. Senate stand aside to allow consideration of legislation they oppose – raising taxes on America’s oil and natural gas companies? After all, there were more than enough votes to keep the proposal from coming to the floor.

Simple, in politics you choose the fights you think you can win, and Senate opponents of higher energy taxes feel like they’ve got the American people behind them.

Here’s why. A spate of surveys shows that strong majorities of Americans favor more production of oil and natural gas here at home. Both Gallup and Rasmussen have new polls showing Americans support construction of the Keystone XL pipeline, which would bring up to 830,000 barrels of oil per day from neighbor and ally Canada. Another Rasmussen survey indicates 2-1 support for developing energy from shale via hydraulic fracturing.

Then there was a Pew Research Center poll that suggests the reason for the findings in the others. Pew found that as gasoline prices rise, so does Americans’ interest in greater oil and natural gas production.

A Harris Interactive poll ties things together: It found 76 percent of voters nationwide believe higher taxes on the country’s energy producers could cost them more at the gas pump – which the Congressional Research Service substantiated in a report last year.

Americans’ reaction to increasing fuel costs – driven higher by the rising cost of crude on the global market – is understandable. They’re saying let’s have policies and strategies that could put downward pressure on crude supply as opposed to policies that would make energy producers’ operations costlier – potentially reducing exploration, development and production while elevating prices.

Thus, a Senate debate that supporters of more oil and natural gas production are eager for the American people to see and hear.

View the original article here