A US oil company cut nearly 2,000 jobs – and reaped $2.1bn in pandemic benefits
Marathon Petroleum received more tax benefits than any other US oil company while also cutting about 9% of its workforce
Christopher Staudinger for the Louisiana Illuminator and Floodlight
Fri 18 Jun 2021 06.00 EDT
One morning in September, word of layoffs began to spread quickly through Marathon Petroleum’s refinery in small industrial community of Garyville, Louisiana.
Seven months into the pandemic, workers at the oil refining plant thought they would be spared the fate of their colleagues at other facilities, who had already been jettisoned into a daunting job market.
“Through the morning, we were seeing people get the phone call and not come back,” said one maintenance engineer, who lost his job after nearly a decade at the facility. “Everybody was on pins and needles waiting for the call.”
Last year, Marathon laid off 1,920 workers across the US despite taking $2.1bn in federal tax benefits meant to cushion the pandemic’s blow to the economy, according to a report from BailoutWatch. The worker interviewed for this story, who asked to remain anonymous for fear of difficulty finding a job, is still unemployed. He and his wife had plans to start a family, which are now on hold. And he is competing with more than 18,000 oil, gas and manufacturing workers in Louisiana who lost jobs last year.
“I’m a born and raised Louisianan. So I’m very much trying to stay in the area,” he said.
Over a year after Congress approved the Cares Act to provide emergency economic relief in response to Covid-19, the oil and gas industry has emerged as a major recipient of stimulus funds, despite heavy job cuts. Marathon Petroleum received more tax benefits under the legislation than any other US oil company, according to BailoutWatch, while also cutting about 9% of its workforce, including 45 Garyville workers.
The company spent millions lobbying in Washington, including on specific Cares Act provisions. Marathon is also defending local government tax breaks it receives as part of a controversial Louisiana subsidy program and meant to create jobs. According to SEC filings examined by BailoutWatch, Marathon came to receive roughly $1.1m in federal dollars for every job the company eliminated.
The Garyville refinery – located along the Mississippi River between New Orleans and Baton Rouge – is the third largest in the country. It can process 578,000 barrels of oil a day into gasoline, asphalt, propane and other substances. It has long received local tax subsidies, some of which have stirred recent controversy in a parish known for heavy industry and a high risk of air pollution.
By the time Marathon made its fall layoffs, it had already quietly announced that it would claim a $1.1bn tax refund, thanks to Cares Act provisions which gave companies tax benefits based on net operating losses.
“Understanding the benefits that Marathon received to presumably stimulate them into maintaining full employment, it’s frustrating to have still been chopped,” the laid-off worker said.
He expressed regret that the company had invested much of its cash flow in recent years in an “aggressive stock buyback program” rather than protecting workers during economic downturns.
During the pandemic, oil corporations have received billions of dollars in taxpayer money from multiple programs, “with no strings attached”, said Jesse Coleman, a senior researcher at Documented Investigations.
“Executives receiving this bailout did nothing to address the industry’s fundamental unsustainability. Instead, these companies decimated their workforce with layoffs while maximizing profits for executives and shareholders,” Coleman said.
Marathon in an email defended its federal pandemic tax breaks. Spokesman Jamal Kheiry said the Cares provision “helps companies hard-hit by the pandemic’s significant effects on the economy”.
Kheiry noted that the company lost $9.8bn after taxes last year and faced uncertainty over demand for gasoline and other refined products, which were needed less during the pandemic. Marathon idled its refineries in Gallup, New Mexico, and in Martinez, California, he added.
“We also made the very difficult decision to reduce our workforce, including reductions associated with the idlings,” he said. “To help affected employees transition, we provided severance, bonus payments, extended healthcare benefits at employee rates, job placement assistance, counseling and other provisions.”
The public dollars Marathon took were made possible by Congress’ changes to federal tax law, which allowed companies to deduct previous years’ financial losses from taxes that the company already paid. That means that the more Marathon lost in 2020 – as well as in losses unrelated to the pandemic in 2019 and 2018 – the more they were refunded from previous years’ tax payments.
BailoutWatch found that the fossil fuel industry was more likely than other sectors to benefit from the tax changes in the Cares Act because of their financial losses in 2019 and 2018, when refining margins were already in decline during those less profitable years. The watchdog group also found that fossil fuel companies lobbied heavily for these changes during the drafting of the legislation. Marathon spent $2.6m on lobbying in Washington in 2020, including to increase Cares Act tax deductions.
In all, the report found that 77 oil and gas companies received $8.24bn from the Cares Act tax refunds while laying off nearly 60,000 employees. Marathon’s federal tax breaks are in addition to state and local tax incentives that the company receives in Louisiana.
Jan Moller, director of the tax policy-focused Louisiana Budget Project, said Louisiana law provides major benefits for the industry. “The thing that makes Louisiana unique is we have the most generous tax exemption scheme in the country for industrial or manufacturing corporations,” he said.
The Industrial Tax Exemption Program (ITEP) exempts businesses from paying certain parish property taxes in exchange for investments that create or maintain jobs.
“That’s where Louisiana communities end up losing an awful lot of revenue,” Moller said. “A global corporation comes in and spends, you know, $2bn to build an oil refinery or chemical plant … and they don’t have to pay 80 to 100% of property taxes on that investment for 10 years. And by the time 10 years is up, a lot of that investment has depreciated.”
Until recent changes, these exemptions were easily renewed. As late as 2017, 40 years after the Garyville refinery was built, Marathon was exempt from paying taxes on 88% of its property as a result of ITEP.
Because of 2016 rule changes to the tax exemption program signed by the Democratic governor, John Bel Edwards, in an executive order, Marathon Petroleum’s tax bill to St John the Baptist Parish increased dramatically this year.
Marathon paid $57m in 2020 property taxes, up from $16m in 2019. Their taxes represent about 59% of the parish’s property tax base. However, Marathon still has an estimated $711m worth of property exempted in St John, which saves the company about $12m in local taxes each year, according to data from Louisiana Economic Development, which oversees the tax exemption program.
These taxes would otherwise be split between St John schools, law enforcement, and parish government. The exemptions have incentivized three thousand temporary construction jobs and one permanent job, according to the data.
Together Louisiana, a statewide network of congregations and civic organizations that has fought to overhaul the exemptions, found that the state allocated $23bn in subsidies to companies which in turn cut net employment by 26,082 jobs over about two decades.
In 2020, Marathon was also accused of fraudulently applying for $43m in ITEP exemptions. After an internal investigation by the state, the company dropped its application.
Broderick Bagert, an organizer with Together Louisiana, said the governor’s 2016 changes to ITEP require companies to either maintain current levels of employment or create new jobs in order to qualify for the exemptions, but enforcement of those rules has been lax.
“The practice of awarding gigantic, you know, hundreds of millions of dollars in subsidies to companies that are not only not creating jobs, but that are actively cutting jobs, is continuing,” Bagert said."