Three United States Senators have raised concerns over the possibility that American taxpayers might be inadvertently subsidizing ExxonMobil’s oil operations in Guyana. Senators Sheldon Whitehouse, Jeffrey Merkley, and Chris Van Hollen addressed a letter to Darren Woods, Chairman and CEO of ExxonMobil, seeking clarity on the matter.
The focus of their concerns is the Stabroek Block Production Sharing Agreement (PSA) implemented in 2016, which includes ExxonMobil’s collaboration with the China National Offshore Oil Corporation (CNOOC) and Hess, recently acquired by Chevron. Under this agreement, ExxonMobil is part of a consortium involved in oil extraction in the Stabroek Block off the coast of Guyana.
According to U.S. tax laws, ExxonMobil qualifies as a “dual capacity” taxpayer. This classification is due to the company’s obligation to pay income taxes to a foreign country while deriving specific economic benefits from operations in that foreign land, such as oil extraction rights. The Senators highlighted the implication of this status, questioning whether American taxpayers are subsidizing ExxonMobil’s international oil production, now conducted in partnership with a Chinese state-owned entity.
A key point of contention is that the Guyana government covers ExxonMobil’s local income taxes from its share of oil profits, raising questions about the potential misuse of U.S. Foreign Tax Credits (FTCs). These credits could unjustly reduce ExxonMobil’s U.S. tax obligations if those payments are deemed subsidies rather than true taxes.
The Senators argue that payments made for economic benefits should not qualify for U.S. FTCs and stress the need for revisiting loopholes that allow blurred distinctions between taxes and economic payments. They estimate that closing such loopholes could save U.S. taxpayers approximately $71.5 billion over the next decade.
The Senators referred to a 2021 International Monetary Fund report, pointing out that the U.S. subsidies to the fossil fuel industry were over $600 billion annually, implying further financial strain through legislation like the “One Big Beautiful Bill Act,” which they claim further subsidizes multinational oil giants.
They have posed seven specific questions to ExxonMobil, seeking detailed information about tax credits claimed, the rationale for including CNOOC as a partner, and distinguishing payments from taxes within the PSA framework. This inquiry underscores broader concerns about U.S. financial involvement in foreign oil ventures and the alignment of such activities with broader economic and environmental policies.