US senators concerned American taxpayers subsidizing Exxon operations in Guyana

-seeking answers from CEO Darren Woods

Concerned that American taxpayers may be subsidizing ExxonMobil’s operations here, three US Senators have written the company’s CEO Darren Woods seeking answers to a series of questions that Guyanese here have also been asking to no avail.

Senators Sheldon Whitehouse (Democrat-Rhode Island), Chris Van Hollen (Democrat-Mary-land), and Jeff Merkley (Democrat-Oregon) sent the letter yesterday to Woods and are seeking a response no later than October 23, 2025.

The questions asked were as follows:

1. Based on Article 15.4 of the (Production Sharing Agreement), did Exxon-Mobil provide income tax returns to the Government of Guyana, and for which years?  Did ExxonMobil directly pay the Government of Guyana any income tax in 2024 and/or 2023, or did the Government of Guyana make such payments on Exxon-Mobil’s behalf out of the government’s share of profit oil?
2. For any income tax payments to Guyana made by ExxonMobil or on its behalf, what portion, if any, did ExxonMobil claim as U.S. FTCs in 2024 and/or 2023?
3. Did ExxonMobil claim any U.S. FTCs on any payments to the Government of Guyana in 2024 and/or 2023?
4. If ExxonMobil claimed any U.S. FTCs in 2024 and/or 2023 on payments to the Government of Guyana, please explain what provisions of the U.S. Internal Revenue Code or regulations the company used to justify the claim and provide a model of how the calculation of creditable tax was made using illustrative numbers that are consistent with actual results.
5. If U.S. FTCs were claimed on any payments to the Government of Guyana, how much did they lower the company’s U.S. federal tax bill for 2024 and/or 2023
6. Does the 2016 PA between ExxonMobil and Guyana make a distinction between taxes owed to the Government of Guyana and payments for economic benefits? If so, please provide the specific language and ExxonMobil’s interpretation of how it affects your U.S. federal tax liability under current rules.
7. What was Exxon-Mobil’s rationale for including CNOOC as a partner in its 2016 PA with the Government of Guyana? 

For a number of years, local commentators have been asking the government here and ExxonMobil some of these questions without success.

According to a statement issued by the US Senators, current US tax regulations offer a loophole for big multinational oil companies drilling in a foreign country to shrink their tax bills, however, closing this loophole would save American taxpayers an estimated US$71.5 billion over ten years. The senators expressed concern about the possibility of American taxpayers subsidising ExxonMobil’s foreign oil production, which is done in partnership with a Chinese state-owned company, CNOOC and sought to explain what qualifies as a US foreign tax credit.

“Payments to a foreign government in exchange for an economic benefit [such as the right to extract oil and gas] are not considered taxes at all and thus cannot qualify for a U.S. foreign tax credit.  However special rules allow ‘dual capacity’ taxpayers to divide up such payments into creditable taxes and non-creditable payments. While it is not difficult to distinguish between taxes and payments for economic benefits, current rules allow contracts to be structured in a way that blurs the distinction.  This loophole is a particular boon to big multinational oil companies”, said.

The letter to Woods by the three senators opened by referring to ExxonMobil’s payments to the Government of Guyana, as per the 2016 Stabroek Block Petroleum Sharing Agreement (PSA), the effect on the company’s U.S. federal tax liability, as well as some background information.  It stated that after the company discovered nearly 11 billion barrels of oil off the coast Guyana, a PSA was signed with the Government of Guyana, and that since the initial Liza oil discovery in 2015, Guyana, “a former climate leader, has embraced oil as a route to prosperity, even as sea level rise could claim its capital, Georgetown, by 2030.”  It further noted that ExxonMobil had partnered with a Chinese state-owned oil company – China National Offshore Oil Corporation (CNOOC) – and Hess (now owned by Chevron) which together pump around 900,000 barrels of oil a day, enabling Guyana to now have the world’s highest expected oil production growth through 2035, “despite elevated sea levels and other harms to forest ecosystems and local communities.”

The letter further noted that the PSA, “which was only made public after significant public pressure on the Government of Guyana,” stipulates that ExxonMobil can pocket 75 per cent of the value of oil produced and sold until it has recouped its recoverable contract costs. The remaining 25 percent of production is split between ExxonMobil and its partners and the Government of Guyana.  Under Article 15.4 of the PSA, the Government of Guyana pays ExxonMobil’s Guyana income taxes out of the Government’s share of the oil profits.  

It is here that the writers expressed concern about the possibility that American taxpayers may be subsidising ExxonMobil’s foreign oil production in partnership with a Chinese state-owned company.  The letter stated that under Regulation 1.901-2(a)(ii)(B), ExxonMobil is considered a “dual capacity” taxpayer, as it is a multinational company that pays an income tax to a foreign country while also receiving a specific economic benefit from that foreign country, such as the right to extract oil and gas.  In addition, the rules prohibiting US companies from claiming foreign tax credits (FTCs) to lower their US tax bill for payments that amount to subsidies from the foreign government should apply.  It emphasised that ExxonMobil “may not be entitled to shrink its U.S. tax bill through any FTCs for payments made by the Government of Guyana for its taxes.”

Local commentators have sought for years to determine whether Exxon has used the purported payment of taxes to the Guyana Government to lessen its US tax liability.

Continuing with its explanation of the tax regime, the letter further pointed out that “payments to a foreign government in exchange for an economic benefit are not considered taxes at all and thus cannot qualify for a U.S. foreign tax credit (FTC).”  It did however acknowledge the existence of special rules which allow “dual capacity” taxpayers to divide up such payments into creditable taxes and non-creditable payments, adding, “While it is not difficult to distinguish between taxes and payments for economic benefits, current rules allow contracts to be structured in a way that blurs the distinction.  This loophole is a particular boon to big multinational oil companies.”

However, the senators went on to inform that a 2024 US Treasury Department proposal would have closed this loophole by limiting the portion of a payment that would qualify for a US FTC to the equivalent amount of tax that the dual capacity taxpayer would have owed the foreign government if it was a non-dual capacity taxpayer. “In other words, it would prevent a company like ExxonMobil from shrinking its U.S. tax bill by claiming a larger U.S. FTC than any other company operating in the country that was not paying for the right to drill on land owned by Guyana. Closing this loophole would save U.S. taxpayers an estimated $71.5 billion over ten years.”

The letter asserted that “big oil companies like ExxonMobil” do not need any more government subsidies and referred to a 2021 IMF report which states that US effective subsidies to the fossil fuel industry are over $600 billion annually. Further, This subsidy saw a significant increase when the Republicans added even more with their “One Big Beautiful Bill Act,” which included a $167 billion handout to companies like ExxonMobil that ship jobs and profits overseas, as well as a special $427 million carveout for the oil and gas industry to limit or avoid the Corporate Alternative Minimum tax that is intended to prevent companies from erasing their tax bill with special breaks.

The release also added that in February, Whitehouse and Representative Lloyd Doggett (D-TX) reintroduced the No Tax Breaks for Outsourcing Act which would reverse the special tax rate for offshore profits that’s half the domestic rate. And in response to the special US$427 million carveout for the oil and gas industry to shrink the Corporate Alternative Minimum tax that Democrats included in the Inflation Reduction Act to prevent companies from lowering their liability by abusing tax loopholes, Whitehouse and other Senate Democrats sent a letter in early September to Treasury Secretary Scott Bessent slamming Treasury’s decision to create new loopholes in the corporate alternative minimum tax for the largest and wealthiest corporations.