Category Archives: Tax credits

Bay Area Refineries, Biofuels, Decommissioning, Fossil fuels, Marathon Petroleum, Phillips 66, Pollution credits, Renewable fuels, Tax credits

Bay Area refineries taking a new path – going from processing crude oil to renewable energy

Refineries Renewed  – Phillips 66, Marathon move to renewable biofuels

East Bay Express, By Jean Tepperman, September 16, 2020
OIL CHANGE: Local residents stand tall in front of the Phillips 66 refinery, which will become the world’s biggest producer of renewable fuels by 2024. PHOTO BY GLENN HUMMEL

Residents of East Bay refinery communities, public officials and environmental organizations had mixed reactions to recent surprise announcements by two Bay Area oil refineries: Phillips 66 said its Rodeo refinery will stop processing petroleum and switch to producing biofuel—made from living plants. It will also close its Rodeo carbon-processing plant. Days later, Marathon announced it would close its Martinez refinery and consider using it to produce biofuel.

“It’s really historic to see 50 percent of the refineries in Contra Costa make a decision to go from processing crude oil to renewable energy,” said Supervisor John Gioia. “It moves us in the right direction, knowing it’s not where we want to end up.” He added that, since the converted refineries will probably employ fewer workers, the county’s big challenge will be “to assist workers to find replacement jobs with equal pay [and create] pre-apprenticeship programs to get local people into jobs.”

Rodeo resident Maureen Brennan said, “I’m 60 percent excited for the community about this new technology and 40 percent worried. I’m happy to have less pollution from the refinery. I’m just suspicious.” She noted that Phillips 66 hasn’t withdrawn permit applications for “two tar-sands-related projects.” Nancy Rieser, another refinery neighbor, was skeptical about the refinery’s mention of “used cooking oil” as a raw material. She said she feared that, instead, rainforests in Brazil and Paraguay would be cleared for “industrial soybean production” to supply the biofuel industry.

And Greg Karras, author of a recent report calling for gradual decommissioning of California refineries, said the move to biofuel is a “strategy to protect oil companies’ stranded assets.” State and federal support for this strategy diverts resources from the real solution: electrification of transportation.

Phillips 66 announced that, starting in 2024, the refinery will become the world’s biggest producer of “renewable diesel, renewable gasoline, and sustainable jet fuel,” reducing the use of fossil fuel. The company said the change will cut carbon dioxide emissions from the refinery by 50 percent, sulfur dioxide by 75 percent and reduce pollution in general. The plant will produce 50,000 barrels of biofuel a day, compared to its current output of 122,000 barrels a day of petroleum products.

In addition, the project’s website, Richmond Renewed, says it “will provide high-paying family-wage jobs with healthcare benefits. Crude oil refinery workers will have the opportunity to transition to produce renewable fuels. Construction jobs for refinery conversion will help the county recover from the COVID-induced recession.”

The Phillips 66 biofuel project—and the possible project at Marathon in Martinez—reflect an oil-industry trend that started before the current economic problems. Many California policies have been promoting a move from fossil-fuel transportation. And environmental activists have been winning battles against planned fossil-fuel expansion. “There’s a lot about this project that’s way less terrible” than previous proposals, said Karras. San Luis Obispo County recently nixed a Phillips 66 plan to bring crude oil by rail from Canada’s tar sands to its Santa Maria refinery. And for years community opponents have stalled two Rodeo refinery proposals they say are also about tar sands: construction of propane and butane storage tanks and expansion of tanker traffic.

For starters, refinery neighbors and environmental organizations are focusing on making sure the county won’t approve the new proposal without a thorough public study. “To understand the details—local pollution shifts, where the feedstock will come from, how many millions of acres could be needed for soy, palm trees, you name it—there must be a full-scale environmental review combined with a 180-degree shift away from their planned tar sands expansions,” said Wilder Zeiser of Stand.earth.

Just Transition

Many are also concerned about the loss of jobs. Mike Miller, president of United Steelworkers Local 326, which represents workers at Phillips 66, said the company told him they could probably handle the reduction in jobs through attrition—10 or 20 people typically retire every year, Miller said, and “there are a lot of older people at our facility.” He added that when the company tells the union something, “most of the time they tell us the truth.” He said the company also mentioned the possibility of transferring workers to other Phillips facilities.

Supervisor Gioia reported that in his conversations with Marathon about its possible conversion to biofuels, managers estimated that the new plant would employ fewer than half of the number soon to be laid off from its Martinez refinery.

The problem, Gioia said, is that “the new jobs in the green economy aren’t there yet.” Many communities whose economies depend on fossil fuel, he said, are looking to the example of the electric-bus manufacturing plant recently opened in L.A. County. “Contra Costa is ground zero” for figuring out how to make a just transition from fossil fuels, Gioia said.

U.S. Representative Mark DeSaulnier said in a statement, “Workers must be taken into consideration and supported through [this] process—including with proper training, advanced warning, and jobs worthy of their skills. I have already begun and will continue to bring together local stakeholders to ensure that a transition away from fossil fuels does not leave anybody behind.”

In his report, Karras calls on governments to require fossil-fuel producers to pay up-front into a fund to help communities recover from their economic and environmental impacts and to provide income support and retraining for laid-off workers. Noting the support for biofuels from state and federal government, he said, “The project being proposed is so heavily subsidized that there’s every justification for holding the company responsible for making the workers and the community whole.”

In addition to jobs, neighbors are concerned about leftover toxic pollutants. Crockett resident Rieser said Phillips has “tanks of toxins and old oil sludge on both sides of Route 80. How will these be dealt with? Abandoned?” In addition to converting the refinery, Phillips 66 says it will close the nearby carbon-treatment plant, leaving another toxic site. A requirement to clean up the pollution, she said, should be a condition of any permit the county may grant.

Clean Fuel?

Biofuel helps reduce the amount of climate-disrupting carbon dioxide produced each year because it’s made from living plants. The carbon dioxide they absorb when they grow balances that emitted when they’re burned. “It’s probably true that biofuel will be some of what we need” to transition from a fossil fuel transportation system, Karras said. That’s because biofuel can be substituted for petroleum in existing vehicles and distribution systems, although for use in airplane engines, it must be blended with at least the same amount of petroleum fuel.

But according to the nonprofit Biofuel Watch, biofuel is “misleading as a climate solution,” for several reasons. One is that producing biofuel still releases carbon dioxide and toxic pollutants. Phillips 66 says the new facility will be 15 percent solar-powered, implying that the other 85 percent of the power will come from burning some kind of fuel.

Hydrocracking, the process Phillips 66 says it will use to produce biofuel, requires large amounts of hydrogen. And the refinery’s process for producing the hydrogen also produces large amounts of carbon dioxide, Karras said—along with health-harming pollutants.

In addition, burning biofuel in vehicles produces some of the same kinds of pollution as burning petroleum products, especially the “particulate matter” that causes the most harm to human health. A report from the National Institutes of Health evaluated research comparing the pollution from burning biofuel and petroleum. Results varied depending on the exact composition of the fuels, but in general the biofuels produced substantial amounts of particulate and other pollution, although less than petroleum. Low-income people of color are mostly likely to live near the refineries and freeways where those pollutants are concentrated.

A 2019 study compared two “pathways” for California to get off fossil fuel, one focusing on renewable fuels, the other on electrification of transportation. It estimated that the electrification pathway would reduce particulate pollution enough to avoid about 12,000 premature deaths a year. The renewable-fuels pathway would also avoid some premature deaths from particulate matter—but only about a quarter as many, 2,800 a year.

Land and Climate

The other big concern about biofuel is where the raw material comes from. Phillips 66 says it will be processing “used cooking oil, fats, greases and soybean oils.” But according to Biofuel Watch, the supply of used cooking oil is very limited. Phillips 66 has said that it will use soy oil from the Plains states, but these supplies are also limited. Many fear that the demand for soy and other biofuel crops is adding to the large-scale destruction of forests.

“Where biofuel production has been successful – using vegetable oils, corn, and sugarcane for example – the environmental and social consequences of vast new demand for these commodities has had severe and rippling effects on markets, food production, biodiversity, and human rights,” wrote Gary Hughes of Biofuel Watch. Destroying forests and soil to produce biofuel sometimes releases several times as much carbon as burning the fossil fuels they replace, according to a report from that organization.

State and federal policies heavily subsidize biofuels, according to Marijn van der Wal of Stratas Advisors, quoted in the Los Angeles Times story on the Phillips 66 announcement. Under the California Low Carbon Fuel Standard and the federal Renewable Identification Number program, producers of biofuel earn “credits” they can sell. They also get $1 per gallon through the federal Blenders Tax Credit program. Altogether, van der Wal estimated, this adds up to “about $3.32 a gallon . . . enough to cover production costs.”

Most American biofuel is produced in California “due to economic benefits under the Low Carbon Fuel Standard,” according to the US Department of Energy. But in a recent letter to the California Department of Energy, Biofuel Watch said this policy “locks in fossil fuel reliance” and “provides cover” for continuing the use of fossil fuel. That’s because it perpetuates the “liquid-fuel supply chain” and liquid-fuel vehicles. This “distracts from the imperative of deep transformation of our energy economy.”

Continental Resources, Enron Oil and Gas (EOG), ExxonMobil, Fossil fuels, Fracking, Keeping Watch on Earth News, Oil Industry, Oil industry subsidies, Shale oil, Tax credits, Tax Cuts and Jobs Act of 2017, Trump

GOP Tax Law Bails Out Fracking Companies Buried in Debt

Repost from DeSmogBlog
[Editor: See also the Pacific Standard report, Inside The Tax Bill’s $25 Billion Oil Company Bonanza.  – RS]

GOP Tax Law Bails Out Fracking Companies Buried in Debt

By Justin Mikulka • Thursday, April 26, 2018 – 08:44

A Scrabble board spells out 'Bankruptcy' overlaid on an unconventional oil and gas rigEOG Resources is one of the top companies in the fracking industry, and thanks to the new tax bill passed by Republicans and President Donald Trump at the end of last year, EOG had an exceptionally strong year compared to 2016.

In 2017, the company reported a net income of $2.6 billion. The previous year? A loss of $1.1 billion. That financial turnaround seems very impressive until you realize that $2.2 billion, or about 85 percent, of its 2017 income was the result of the new tax law. Without that gift from the GOP and Trump, EOG would have lost approximately $700 million between those two years. Instead they are $1.5 billion ahead of the game.

With numbers like these, it is easy to see how the Tax Cuts and Jobs Act of 2017 was a much-needed lifeline for the money-losing fracking industry. EOG is routinely touted as one of the best shale oil and gas companies. Yet the company still lost $700 million in the past two years. Or at least it would have if not for the tax bill.

This is the same company that an analyst at the investment advice website Seeking Alpha says is “generally considered one of the best unconventional upstream oil and gas players in the business, and its financials back it up.” If those are the best financials in your industry, your industry has a big problem.

An interesting side note is that EOG stands for Enron Oil and Gas, which was spun off as its own company from Enron — the company notorious for one of the great energy Ponzi schemes of the 20th century. Today, an Enron spinoff company is being held up as the most fiscally sound in the shale oil industry.

And Seeking Alpha is now pushing EOG as a good investment and wondering when “the equities market will wake up and smell this opportunity” despite EOG still being over $6 billion in debt. Without the tax overhaul it would be much harder to make this argument.

There is one prominent person in the shale industry warning against rosy forecasts for shale oil, and that is Mark Papa, head of independent oil company Centennial Resource Development. Papa’s last job? CEO of EOG Resources.

Continental Resources is another of the shale companies being heralded as a good investment in 2018. Continental is run by Harold Hamm who was an advisor to the Trump campaign and has taken the title of “Shale King” that once belonged to Aubrey McClendon. Hamm’s net worth is estimated at over $13 billion.

Thanks to the new tax law, Continental took home an extra $700 million because its effective tax rate for 2017 was negative 406 percent.


Continental Resources 2017 Annual 10-K Filing

And Continental needed that money (although Hamm certainly doesn’t). In 2007 Continental had $165 million in debt and paid $13 million a year in interest on that debt. In 2016 its debt had ballooned to $6.5 billion and the annual interest payments rose to $321 million. The GOP tax law essentially pays off two years of Continental’s interest payments, allowing this failing business model to continue because Continental has not been generating enough income to pay even the annual interest on its debt.

While the company he leads is drowning in $6.5 billion of debt, Harold Hamm is personally worth twice that amount. He’ll be fine. He was easily able to afford one of the most expensive divorce settlements ever.

These are just two examples of shale companies receiving an immediate financial lifeline from the GOP tax bill. These companies also will benefit from lowered tax rates in future years. However, this one-time handout simply masks the reality that the shale revolution looks a lot like a Ponzi scheme enriching CEOs and Wall Street financiers by producing oil and gas with borrowed money that is unlikely to be paid back in the future.

And Hamm and the Wall Street financiers have no incentive to do anything differently. Sure bankrupt energy companies destroy worker pensions, wipe out investors equity, layoff thousands of workers — but if we use the coal industry as an example — CEOs will still get bonuses after driving their companies into bankruptcy.

Tax Bill Especially Beneficial to Oil Companies

The benefits of the new tax bill are certainly not unique to oil and gas companies. Utility companies did even better and the big Wall Street banks who are financing the cash-burning shale industry also are awash in new profits thanks to the GOPtax overhaul.

However, due to the nature of how oil and gas companies book profits and losses — and the epic money-losing streak the shale industry created over the past few years — these companies benefited more than most.

To be clear — this bill which was signed at the end of 2017 was applied to the deferred tax liabilities that were already on the books — thus erasing a large chunk of the liabilities for these companies that had built up while the industry kept borrowing to drill more and ultimately lose more money. Simply a bailout of reckless financial behavior by any other name.

And it wasn’t just the companies primarily working in shale that benefited. ExxonMobil raked in a $6 billion benefit from the new tax law, which even CNN Money referred to as a “gift.”

Industry Will Use Bailout to Borrow and Drill More 

In discussing the trade deficit President Trump recently tweeted the following:

Coming from a man whose career includes multiple bankruptcies, this shouldn’t be surprising. The shale oil industry definitely has a kindred spirit in the White House.

What happens when you give free money to gamblers on an epic losing streak? In the shale industry, they double down.

ExxonMobil has promised to use the billions it gained from the tax bill to … drill and frack more shale oil. Which is likely to result in further discounts of Permian Shale oil, which will lower the price of oil and put more pressure on the heavily leveraged shale companies.

While the mainstream media is pushing the industry message that shale companies now are focused on profits instead of just production volume, record U.S. oil production and predictions for even greater increases would appear to reveal the lie in that promise. Just as most sharks must swim to stay alive, shale companies must drill to preserve CEO bonuses, which are often tied to oil production, not profits. So, they drill. Even when that means losing money on nearly every barrel of oil they pump.

A graphic from the Wall Street Journal reveals just how much money the shale industry has been losing compared to traditional oil — all while CEOs such as Harold Hamm were amassing billions in personal wealth. The shale oil industry generated free cash flow pumping oil for one brief period in the last seven years. Hamm has done a bit better personally during that time frame.

Shortly after President Trump signed the new tax bill, he took another vacation to Mar-a-Lago where he reportedly told those in attendance: “You all just got a lot richer.”

A rare moment of honesty from the President. And while he wasn’t speaking specifically to shale oil CEOs — it’s safe to say they got the message loud and clear.

Follow the DeSmog investigative series: Finances of Fracking: Shale Industry Drills More Debt Than Profit

Keeping Watch on Earth News, Oil Industry, Oil industry subsidies, Tax credits, Trump, Valero Energy Corporation

INSIDE THE TAX BILL’S $25 BILLION OIL COMPANY BONANZA

Repost from Pacific Standard
[Editor: Valero Energy’s windfall of DIRECT ONE-TIME 2017 TAX SAVINGS from the Trump tax law was $1.9 BILLION, according to Valero’s 4th quarter 2017 SEC filing .  See chart below. See also Valero’s Feb 2018 press release and Valero’s detailed SEC 2017 Year End Fiscal Report.  – RS]

A Pacific Standard analysis shows the oil and gas industry is among the tax bill’s greatest financial beneficiaries.

By Antonia Juhasz, Mar 27, 2018
President Donald Trump pitches his Tax Cuts and Jobs Act at the Andeavor oil refinery in North Dakota in September of 2017.
President Donald Trump pitches his Tax Cuts and Jobs Act at the Andeavor oil refinery in North Dakota on September 6th, 2017. (Photo: WhiteHouse.gov)

Last month, during a retreat in West Virginia, congressional Republicans set out their 2018 party goals. Their primary objective is to hold onto their majorities in the House of Representatives and the Senate, and the key mechanism for doing so is to ride the coattails of the Tax Cuts and Jobs Act. “The tax bill is part of a bigger theme that we’re going to call The Great American comeback,” said Representative Steve Stivers (R-Ohio), chairman of the National Republican Congressional Committee. “If we stay focused on selling the tax reform package, I think we’re going to hold the House and things are going to be OK for us.”

More than 50 percent of the tax bill’s benefits will go to the wealthiest 5 percent of Americans, and more than 25 percent to the wealthiest 1 percent, according to the Institute on Taxation and Economic Policy. As Businessweek put it, “President Donald Trump and Republicans sold their $1.5 trillion tax cut as a boon for workers, but it’s becoming clear just two months after the bill passed that the truly big winners will be corporations and their shareholders.”

Pacific Standard‘s original analysis finds that it is the oil and gas industry, including companies that backed the presidency of Trump and whose former executives and current boosters now populate it, that are among the tax bill’s largest and most long-lasting financial beneficiaries.

Just 17 American oil and gas companies reported a combined total of $25 billion in direct one-time benefits from the 2017 Tax Cuts and Jobs Act. Many of the companies will also receive millions of dollars in income tax refunds this year. Looking forward, the Tax Act then reduces all corporate annual tax bills by a minimum of 40 percent every year in perpetuity, while adding new benefits that function as government subsidies for the oil and gas industry. The companies’ activities in the United States are made less expensive, thereby encouraging a further expansion of oil and gas operations.

Pacific Standard reviewed the Annual 10K and Fourth Quarter Reports filed with the U.S. Securities and Exchange Commission for 2017 by 17 U.S. oil companies, looking at the largest companies in production, refining, and pipelines that also clearly specified the impacts of the Tax Act in their results. Private companies, such as Koch Industries, which undoubtedly benefit from the legislation, could not be included because they are not required to make these financial reports publicly available.

$25 BILLION IN OIL COMPANY TAX SAVINGS

Screen Shot 2018-03-25 at 6.19.30 PM
(Chart: Antonia Juhasz/Pacific Standard)  …CLICK TO ENLARGE

Continue reading INSIDE THE TAX BILL’S $25 BILLION OIL COMPANY BONANZA →

Air Quality, Carbon emissions, Climate Change, Federal Regulation (U.S.), Land, Oil exports, Public Health, Solar energy, Tax credits, Water quality, Wildlife, Wind energy

Federal spending deal falls short on environment

Repost from the San Francisco Chronicle

Spending deal falls short on environment

By Annie Notthoff, December 17, 2015  |  Annie Notthoff is director of the Natural Resources Defense Council’s California advocacy program.
Senate Majority Leader Mitch McConnell Photo: J. Scott Applewhite, Associated Press
Senate Majority Leader Mitch McConnell Photo: J. Scott Applewhite, Associated Press

The spending and tax policy agreement Congress and the White House have reached to keep the government funded and running includes important wins for health and the environment.

But there’s good news to report, only because of the Herculean efforts of House Minority Leader Nancy Pelosi, D-San Francisco, Senate Minority Leader Harry Reid, D-Nev., and the White House, who worked tirelessly to block nearly all of the dozens and dozens of proposals Republican leaders were pushing.

Those proposals would have blocked action on climate, clean air, clean water, land preservation and wildlife protection and stripped key programs of needed resources. The Republican leaders’ proposals were the clearest expression yet of their “just say no” approach to environmental policy. They literally have no plan, except to block every movement forward on problems that threaten our health and our planet.

The worst aspect of the budget agreement is another clear indication of Republican leaders’ misplaced priorities — they exacted an end to the decades-long ban on sending U.S. crude oil overseas in this bill, in return for giving up on key elements of their antienvironment agenda.

Senate Majority Leader Mitch McConnell, R-Ky., made that give-away to the oil industry one of his top priorities. It will mean increased oil drilling in the U.S., with all the attendant dangers, with the benefits going to oil companies and overseas purchasers. That won’t help the American public, or the climate. It’s simply an undeserved gift to Big Oil.

In good news, the agreement extends tax credits for wind and solar energy for five years, which will give those industries long-sought certainty about their financing.

Wind and solar will continue to grow by leaps and bounds, helping domestic industry, reducing carbon pollution and making the U.S. less vulnerable to the ups and downs of fossil fuel prices.

Democratic leaders deserve all our thanks for what they were able to keep out of the budget deal. Gone are the vast majority of obstacles Republican leaders tried to throw in the way of environmental protection. Recall for a moment the 100 or more antienvironmental provisions Republican leaders tried to attach to these spending bills. Those included efforts to:

• Block the Environmental Protection Agency’s Clean Power Plan, which sets the first-ever limits on carbon pollution from power plants — our best available tool to combat dangerous climate change.

• Roll back the Obama Administration’s Clean Water Rule, which would restore protections for the potential drinking water supplies of 1 in 3 Americans.

• Repeal the EPA’s newly issued health standards to protect us from smog.

• Bar the Interior Department from protecting our streams from the pollution generated by mountaintop removal during coal mining.

• Strip Endangered Species Act protections for gray wolves, the greater sage grouse, elephants, the Sonoran Desert tortoise, and other threatened animals.

• Force approval of the proposed Keystone XL tar sands oil pipeline, which President Obama already has rejected.

There’s more work ahead to protect the environment, starting with eliminating the threat of oil drilling in the Arctic and off the Atlantic Coast.

But despite the efforts of Republican congressional leaders to hold the public hostage and bring us to the brink of another government shutdown, a budget deal has emerged that protects environmental progress.