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Home / Articles / News / Cover Story /  Jacked: Utah gave oil and gas companies $200 million-plus while the rest of us got squeezed at the pump Page 1
Cover Story

Jacked: Utah gave oil and gas companies $200 million-plus while the rest of us got squeezed at the pump Page 1

By Eric S. Peterson
Posted // November 5,2008 - For nearly two hours on a recent September morning, the state Legislature’s Tax Review Commission (TRC) had been up to its eyeballs in statistics about the Utah oil industry. Anxious to move on, a tall man from the sparse crowd stood up to address the panel.?

“If I could just say a few things,” said Newfield Exploration executive Bruce Dalworth, who strode toward the front of the Capitol committee room. An exhausted committee relented. Commission members had been listening for weeks to determine why taxpayers should continue giving oil and gas companies doing business in Utah the same generous tax break they first offered back in 1998—when oil was only $13 a barrel. Oil prices have since jumped to nearly 10 times that amount in summer 2008 and were still hovering near $100 a barrel in the past month.

“Now, one of the reasons gas prices have increased so much,” Dalworth said in a deep professorial baritone, “is because the United States has ignored energy policy for the last 30 years.” Dalworth spoke of supply and demand and how the United States had a “huge national-security issue” by depending on foreign oil when the country could be tapping resources like the Arctic National Wildlife Refuge in Alaska. “ANWR has been ignored, and we’re just talking about very small environmental consequences,” Dalworth said, while pinching his index finger against his thumb as if holding a small pea—or, perhaps, imagining crushing the committee chair’s head. “A letter to The New York Times will probably be the only footprint left behind.”

Consumers at a downtown Salt Lake City gas station weigh in on whether Utah’s oil and gas industry deserves year after year of generous tax breaks:

“I know Exxon Mobil last quarter alone made, I think, 10 or 13 billion more than last year. I don’t think it’s fair; why should we pay to make them richer than they already are?”
?—Taylor Critchfield, Salt Lake City

“I don’t know how the mechanics work, the politics of the oil and gas companies, but it just seems like we’ve been manipulated. As much as business was struggling last year, the millions and billions they were making, it was just like we were transferring wealth. No, I don’t feel like we should be giving them any subsidies. And there should be a lot more transparency. I would like to know how the system works.”
?—Melanie Hamilton, Salt Lake City

“I came from Connecticut, and gas was really high there. And in Utah, it’s just as high as when I left Connecticut. What are you gonna do? You gotta pay for gas. We can’t really do much to get them to drop the prices. I don’t think [they deserve the tax breaks] unless they’re giving something back. If they’re getting a tax break, where’s our break?”
George Defreitas, Salt Lake City

For months, the TRC—made up of legislators, tax attorneys and economics professors—had been getting answers from oil and gas industry representatives about the need to maintain a rock-bottom 3- to 5-percent tax rate on their industry. Oil and gas companies in Utah also qualify for several generous exemptions that help pay for new oil and gas wells, old wells and wells in midlife crisis that require water or carbon dioxide to be pumped into them to squeeze out more oil or gas.

Counting these exemptions, estimates show subsidies over the last two years—when record oil prices have blown gold all over the industry in sales alone—have put more than $200 million into the pockets of oil and gas companies doing business in Utah.

With the stock market in cardiac arrest since the Wall Street bailout, oil prices have dropped, granting some relief at the pump. But, as of press time, Utah drivers pay 20 cents more per gallon than the national aveage, making this state home to the seventh-highest gas prices in the nation, according to AAA reports and the Oil Price Information Service.

So as summer rolled into fall, the question the TRC was still grappling with is: Should taxpayers subsidize these companies while they’re still bankrolling on pump sales? So far, the public has heard little about the discussion. George Defreitas, a Connecticut native who moved to Salt Lake City because of its relatively low cost of living, was caught off guard by the high gas prices (see sidebar, p. 19). He was also surprised to hear about the state’s generous tax exemptions for the oil and gas industry.

Defreitas wondered: “If they’re getting a tax break, where’s our break?”

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