What They Don’t Tell You About Oil Industry Tax Breaks

[Bernice Moore]

What They Don’t Tell You About Oil Industry Tax Breaks

http://blogs.alternet.org/speakeasy/2011/05/25/what-they-don%E2%80%99t-tell-you-about-oil-industry-tax-breaks/

[Robert Howard]

What They Don't Tell You About Oil Industry Tax Breaks

http://blogs.alterne...try-tax-breaks/

from the article

"Bush later wrote Nixon’s treasury secretary, David Kennedy, to thank him for reversing an earlier statement hinting that the White House might cave in to popular pressure for reform, adding: “I was also appreciative of your telling how I bled and died for the oil industry.”

So, in 1969, 41 was bleeding and dying for big oil and in 2011 we're all bleeding and dying for the oil industry......

1109. Commission Document 1113 - Handwritten Letter from Hyman Rubenstein of 15 Jun 1964 re: Oil Tycoons ...

Hotel Calumet letterhead

My Dear Mr. Griffin:

I was just wondering if it could be possible for 1 one of the oil tycoons of Dallas was behind or supported Oswald in the assassination of our beloved President. I believe the honorable Jack Kennedy did not approve of the outcome of the Tidelands Oil Bill which is now dominated by Texas, Louisiana and California. I believe that Mr. Kennedy believed that

the Tidelands or oil offshore bill belonged to all the people that the royalties belong to the school districts. Also there has been a lot of talk about the 271/2 percent oil depletion allowance that only the oil companies are allowed to deduct right off the top. I may be wrong but I believe my arguments merit consideration, thought & thorough investigation.

am very serious about the above matter - think it over.

P.S. You might check and see how Kennedy voted on the Tidelands Oil Bill when he was a U. S. Senator.

[Jim Phelps]

The real story on oil industry tax breaks is this one.

Bronfman and Bush were birds of the same feather, with very similar investor circles.

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http://www.jfkmontreal.com/power_brokers.htm

Sam Bronfman—a billionaire—was one of attorney Louis Bloomfield’s wealthiest clients. Bronfman made his fortune as a bootlegger during US prohibition. He bought Seagram’s and built it into a liquor dynasty. In 1963, former bootlegger Bronfman plunged into an unfamiliar business venture by aggressively purchasing huge oil holdings. He acquired Texas Pacific Oil and its subsidiaries in India, Malaysia, Guatemala, Indonesia, and Italy;2 plus Ranger Oil.

Bronfman biographer Michael Marrus summarized Sam Bronfman’s sudden interest in oil as follows:

In 1963, when production was about 10,000 barrels a day, Sam made his biggest plunge with the purchase of Texas Pacific, a major producer—"the venerable Texas Pacific Coal and Oil Company, founded in 1888 and possessing one of the oldest of Texas charters," said Sam about the pedigree, speaking as if it were a famous distillery. While it is doubtful that Sam foresaw the energy crisis of subsequent decades as he later claimed, there is no question that his acquisition was a remarkable financial coup—at a time when "leveraged buyouts" were a concept of the future. With a Seagram working capital of $382 million and earnings of $34 million a year, Sam borrowed $75 million from institutional investors, in 25-year promissory notes. He put $50 million of that as a downpayment on the Texas Pacific purchase price of $266 million, and undertook to pay the balance out of future revenues—a strategy then facilitated by US tax laws. The key player in these arrangements was Mark Millard, a partner in Loeb, Rhoades and Co. and the man who had recommended the appointment of Carrol Bennett. Millard convinced Sam of the wisdom of the oil payment scheme and nudged him to make a Seagram bid.

By 1975, Texas Pacific had paid off its debt, while in the process its oil and gas reserves expanded phenomenally. A handsome legacy to Seagram, the company proved to be one of Sam’s shrewdest moves; bought with only $50 million in borrowed cash, it was sold in 1980 to the Sun Oil Company for a grand total of $2.3 billion. Here too, Mark Millard played a major role. A decade after Sam’s death, Seagram used this capital to acquire a 20 percent interest in Dupont, taking the company that Sam had built from being a large wine and spirits company to a major diversified corporation.

(Michael Marrus, Samuel Bronfman, pp. 372-373)

Kennedy’s Oil Tax

It’s interesting Sam Bronfman invested heavily in foreign subsidiaries of Texas Pacific in 1963. Kennedy had placed a heavy tax burden on foreign subsidiaries of US oil companies. Once Kennedy was removed from office, Bronfman’s oil investments began to increase. The following is researcher Jim Marrs’ description of Kennedy’s oil tax:

When John F. Kennedy became President in 1961, the oil industry felt secure. But President Kennedy then began to assault the power of the oil giants directly, first with a law known as the Kennedy Act, and later by attacking the oil depletion allowance. The Kennedy Act, passed on October 16, 1962, removed the distinction between repatriated profits and profits reinvested abroad. Both were now subject to US taxation. The measure also was aimed at preventing taxable income from being hidden away in foreign subsidiaries and other tax havens. While this law applied to industry as a whole, it particularly affected the oil companies, which were greatly diversified with large overseas operations.

By the end of 1962, oilmen estimated their earnings on foreign investment capital would fall to 15 percent, compared with 30 percent in 1955.

One of the most sacred of provisions in the eyes of oilmen was the oil depletion allowance, which permitted oil producers to treat up to 27.5 percent of their income as tax exempt. In theory this was to compensate for the depletion of fixed oil reserves but, in effect, it gave the oil industry a lower tax rate. Under this allowance, an oilman with a good deal of venture capital could become rich with virtually no risk. For example, a speculator could drill ten wells. If nine were dry holes and only the tenth struck oil, he would still make money because of tax breaks and the depletion allowance.

It was estimated that oilmen might lose nearly $300 million a year if the depletion allowance was diminished.

Attempts to eliminate or reduce the depletion allowance were rebuffed year after year by congressmen, many of whom were happy recipients of oil-industry contributions.

Speaking of his tax reform act of 1963, President Kennedy pointed the finger at the oil companies, saying: "… no one industry should be permitted to obtain an undue tax advantage over all others."

Included in Kennedy’s tax package were provisions for closing a number of corporate tax loopholes, including the depletion allowance. Needless to say, oilmen both in Texas and elsewhere felt threatened by Kennedy and his policies. Kennedy’s use of his personal power against the steel manufacturers had shown them that the young President meant the enforce his will in these matters.

(Jim Marrs, Crossfire, pp. 276-277)

Was Sam Bronfman’s acquisition of Texas Pacific Oil truly a "shrewd move" as biographer Michael Marrus described, or was it a perk for participating in President Kennedy’s assassination?

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http://books.google.com/books?hl=en&id=2IZZ-_EQWowC&pg=PA55&lpg=PA55&dq=kennedy+act+october+16+1962&prev=http://books.google.com/books%3Fq%3Dkennedy%2Bact%2Boctober%2B16%2B1962%26lr%3D&sig=OPF9MfIJ2z8v9msloRURWAXOXSU#v=onepage&q=kennedy%20act%20october%2016%201962&f=false

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Bronfman had two Axes to grind against JFK's head.

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http://en.wikipedia.org/wiki/Hess_Corporation

These New York oil guys were none to happy either. Hess Oil provided the fuel for the invasion of Europe and the "Big Red One" to crush Hitler. They have extensive Carribean holdings.

Hess oil had extensive off shore oil operations in the JFK era, and enough to fuel the US Army in WWII invastion of Germany.

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They too had two axes to grind.

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For those that don't recall the 1st Infantry is the Big Red One, and was DDE's favorite Division and the one that landed Ohama Beach. Perhaps the Hess Oil connections are what landed DDE a cushy Columbia University President job after the war.

http://www.army.mil/article/22336/1st-infantry-division-honors-d-day-veterans/

On June 6, 1944, Allied forces under Gen. Dwight Eisenhower assaulted the coast of Normandy with 1st Infantry Division units leading the way on Omaha Beach.

Sixty five years later, the 1st Inf. Div. remembered that pivotal moment in history, and the connection between "Ike" and the "Big Red One," by marching in a parade through Eisenhower's hometown of Abilene, Kan., on the anniversary of D-Day.

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Edited May 31, 2011 by Jim Phelps