ExxonMobil Sues European Union Over Windfall Tax

---

Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--U.S. petrochemical major ExxonMobil Corporation (NYSE:XOM) (Irving, Texas) has decided to sue the European Union (EU) in a challenge to the windfall tax on the surplus profits of oil and gas companies.

The company's German and Dutch subsidiaries have filed a joint action at the General Court of the European Union against the European Commission's proposed windfall tax. The so-called "solidarity contribution" agreed in September will see fossil-energy companies--those in the oil, gas, coal and refining sectors--required to pay back a portion of their "huge, unexpected profits" over the past year to help Europe's citizens deal with the ongoing energy crisis and record electricity and gas prices sparked by Russia's invasion of Ukraine. The European Commission (EC) expects them to pay windfall taxes of 33% on 2022 profits that are 20% above the increase of their average profits of the last three years. This temporary windfall tax is expected to net 25 billion euro (US$26.4 billion). The company argued that the tax will not solve the gas crisis and will only serve to hamper investment in the region.

"Our affiliates, ExxonMobil Producing Netherlands BV and Mobil Erdgas-Erdöl GmbH, are suing the European Council in a bid to annul a new windfall tax on oil and gas companies," ExxonMobil spokesman Casey Norton, confirmed to media in an emailed statement. "This litigation is driven by our concern about the unintended long-term effects of this policy on the competitiveness of European industry. This tax will undermine investor confidence, discourage investment, and increase reliance on imported energy and fuel products."

He added: "We recognize that the energy crisis in Europe is weighing heavily on families and businesses, and we've been working to increase energy supplies to Europe. Our challenge is targeted only at the counter-productive windfall profits tax, and not any other elements of the package to reduce energy prices. The windfall tax will not remedy any shortage of energy supply and cannot realistically achieve a timely impact, so the European Commission and Council were wrong to use exceptional powers under Article 122(1) TFEU to speed its approval." The company's chief financial officer told investors last month that the EU tax would cost the group "over US$2 billion."

European Commission Spokesperson Arianna Podestà refuted ExxonMobil's claims: "The Commission maintains that the measures in question are fully compliant with EU law. [The measure] aims to ensure the whole energy sector pays its fair share in these difficult times for many to address the extraordinary energy crisis resulting from the weaponization of the energy supply by Russia."

In August, Industrial Info reported on how four of the world's largest integrated oil companies-- Shell plc (NYSE:SHEL) (London, England), BP plc (NYSE: BP) (London), ExxonMobil Corporation (NYSE:XOM) (Irving, Texas) and Chevron Corporation (NYSE:CVX) (San Ramon, California)--posted blockbuster earnings in the second quarter driven by a number of key reasons, led by higher oil and gas prices, increased production and rising demand. For additional information, see August 3, 2022, article - Big Oil Q2 Profits Gush as Prices, Margins, Demand Rise.

Last month, Industrial Info noted some early negative impact that the U.K.'s windfall tax was having on upcoming North Sea oil and gas projects. French company TotalEnergies SE (NYSE:TTE) (Courbevoie, France) has said that it will cut its planned investment by £100 million (US$105 million)--around 25% of its planned spending--after the government recently bumped up the tax burden on oil and gas company profits from 25% to 35%. Fellow oil and gas majors Equinor (NYSE:EQNR) (Stavanger, Norway) and Shell plc (NYSE:SHEL) (London, England) released statements warning that they are separately re-evaluating their U.K. investment plans. For additional information, see December 14, 2022, article - North Sea Oil & Gas Investments Cut After New Windfall Tax.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).