Subsidiary of Oil Company Headquartered in DeLay’s District, but Incorporated Offshore, Receives Taxpayer Grant

Oct. 20, 2005

Subsidiary of Oil Company Headquartered in DeLay’s District, but Incorporated Offshore, Receives Taxpayer Grant

Noble Corp. Gave More Than $20,000 in Contributions to Candidates Affiliated with DeLay’s Texas Redistricting Scheme

WASHINGTON, D.C. – On Oct. 17, the U.S. Department of Energy (DOE) awarded an $849,670 grant to a subsidiary of the oil drilling company Noble Corporation, whose incorporation in the Cayman Islands enables it to avoid paying some of its U.S. income taxes. But Noble Corp.’s official headquarters is in Sugar Land, Texas – the home district of U.S. Rep. Tom DeLay. Public Citizen today issued a Freedom of Information Act (FOIA) request to the DOE to determine whether DeLay or any other member of Congress interceded in the grant-making process on behalf of Noble Corp.

While giving grants to companies incorporated offshore is not illegal, Public Citizen said it is bad policy for the DOE to reward a company with taxpayer money when that company is not a good corporate citizen. In particular, given the high gas prices being paid by consumers and the record-high profits earned by oil companies, it is poor judgment for the DOE to dole out cash to a wealthy energy company that is benefiting from today’s energy crisis while paying less income tax than if it were incorporated in the United States.

Since 2000, Noble Corp. has enjoyed profits of more than $1 billion. Because the company is incorporated in the Cayman Islands, its federal taxes are significantly less than if the company were incorporated in the United States. (The company likely pays some U.S. taxes because it has U.S. subsidiaries but does not pay as much as a company fully incorporated in the United States.) Indeed, Noble Corp. boasts in its most recent annual report filed with the U.S. Securities and Exchange Commission: “Noble is a Cayman Islands company. The Cayman Islands does not impose corporate income taxes.”

The two-year grant to Noble Corp., part of the DOE’s oil and gas research program, is for the development of a “rotary steerable” drilling system that enables drill operators to guide drill bits automatically. According to the company’s Web site, it is one of the largest offshore drilling contractors in the world.

“It is irresponsible that the federal government is rewarding a wealthy offshore oil corporation, particularly at a time of record budget deficits,” said Joan Claybrook, president of Public Citizen. “A company that incorporates offshore to avoid U.S. taxes shouldn’t be allowed to qualify for such grants.”

The size of the grant, nearly $850,000, is smaller than the 2004 base salary of James C. Day, Noble Corp’s president, chief executive officer and chairman of the board. His base salary was $889,583, which doesn’t include his $1 million cash bonus.

The grant was given to Noble Wellbore Technologies, a direct subsidiary of Noble Corp. While Noble Wellbore Technologies is incorporated in Delaware, it is controlled by Noble Corp. Such a Byzantine corporate structure is common with companies that seek to shelter income earned by their U.S. subsidiaries in offshore tax havens like the Cayman Islands.

Noble Corp’s aggressive efforts to retain its tax haven status are evident in that since June 2002, its wholly owned subsidiary, Noble Drilling Services Inc., has paid PriceWaterhouseCoopers $480,000 to lobby for legislation that would help the company keep its offshore tax status, according to lobbying disclosure forms filed with the Secretary of the Senate. Among the PriceWaterhouseCoopers lobbyists representing Noble Corp. are former House Ways and Means Committee Chairman Bill Archer (R-Texas) and Don Carlson, Archer’s former chief of staff.

In 2002, the House of Representatives and Senate approved legislation that would have denied federal contracts and grants to companies that incorporate in offshore tax havens like the Cayman Islands. But due to the efforts of an army of lobbyists hired by companies like Noble and Tyco, the legislation died. Among the lobbyists credited with killing the bill was indicted Republican lobbyist Jack Abramoff, who was working for Tyco.

Public Citizen today also sent a letter to the House and Senate energy committees demanding that action be taken to deny DOE grants to companies such as Noble Corp. that incorporate in offshore tax havens.

“Noble has made a billion dollars in profits since 2000, but it doesn’t pay its fair share in taxes,” said Tyson Slocum, research director of Public Citizen’s energy program. “Taxpayers are being gouged at both ends of this deal. Noble is getting rich off high energy prices, while the Department of Energy is giving away taxpayers’ hard-earned dollars in the form of an unnecessary grant.”

Recent news reports suggest that the Bush administration has tried to end the DOE’s oil and gas research grant program, but Congress has fought to keep it afloat. This may explain why two executives associated with Noble Corp. gave $21,164 in campaign contributions between September and October 2004 to a slate of candidates associated with DeLay:

● On Oct. 25, 2004, Noble Corp. Chief Financial Officer Mark A. Jackson and his wife Susan gave a total of $10,000 to the Team Texas Committee, a fundraising committee associated with Texas Republicans who ran in the six districts affected by the redistricting plan developed in part by DeLay: U.S. Reps. Pete Sessions (who defeated Democratic Rep. Martin Frost), Randy Neugebauer (who defeated Democratic Rep. Charles Stenholm), Ted Poe (who defeated Democratic Rep. Nick Lampson), Louis Gohmert (who defeated Democratic Rep. Max Sandlin), Arlene Wohlgemuth (who lost to Democratic Rep. Chet Edwards), and Becky Armendariz-Klein, (who lost to Democratic Rep. Lloyd Doggett).  DeLay was a proponent of Team Texas; he co-hosted a fundraiser for the committee in 2005.

● On Sept. 28, Charles D. Davidson, Noble Energy president, CEO and chairman, gave $3,000 to Team Texas. Noble Energy, an oil and gas exploration and production company, is affiliated with Noble Corp.

● In addition to the $13,000 in contributions to Team Texas, Davidson and Jackson gave an additional $8,164 combined directly to the campaigns of Sessions, Gohmert and Wohlgemuth all on the same day, Oct. 29.

To read Public Citizen’s FOIA request, click here.

To read the letter, click here.

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