Exxon Mobil challenges claim in Knowles' ad

Oil company says it 'anticipates no benefit' from corporate tax bill

Posted: Friday, October 22, 2004

FAIRBANKS - Exxon Mobil is aggressively countering attack ads by former Gov. Tony Knowles by distributing a letter saying the U.S. Senate candidate is flat wrong about the effects of a recent corporate tax bill.

Knowles has said the company stands to gain a $6.5 billion tax break in a bill supported by his campaign rival, U.S. Sen. Lisa Murkowski. Knowles has criticized Murkowski for not trying to get Congress to direct that money toward payment of court-ordered damages for the 1989 oil spill.

Ken Freeman, Alaska public affairs manager for Exxon Mobil, said in a letter to Knowles that the $6.5 billion figure is "completely false." In fact, the company "anticipates no benefit" from the bill, he said.

"We assume you will now cease using this comment in your campaign advertising," Freeman said.

Knowles spokesman Matt McKenna said the governor is sticking by his claim. McKenna said he saw some wiggle room in Freeman's wording.

"They say in their letter 'Exxon anticipates no benefit,' " he said. "They don't say they aren't going to get the money."

McKenna said Knowles' point is that Exxon needs to pay, and the tax bill didn't do anything to hold the company to its obligation.

"The only people that aren't going to benefit are the 20,000 Alaskan families who are still owed $4.5 billion from Exxon," he said.

McKenna said the campaign calculated the $6.5 billion. It started with a report in Energy and Environment Daily, a Washington, D.C., publication that reported Exxon had about $22 billion in offshore assets that could be "repatriated," or brought to the United States, under a lowered tax rate.

The difference in the tax rates - 35 percent versus 5.25 percent - amounted to $6.5 billion, McKenna said.

"I know they have a lot of talented number crunchers over there," McKenna said of Exxon Mobil. "Surely they can figure that one out."

Lauren Kerr, spokeswoman for Exxon Mobil in Dallas, said that the campaign's calculation might have been well-intentioned but was far too simplistic to be accurate.

Current tax law, she noted, already allows U.S. companies to collect a U.S. tax credit on their overseas earnings if the companies have paid income taxes on those earnings to foreign governments. The idea is to avoid double taxation, she said.

The tax reduction Congress just passed applies only to earnings that are not eligible for those tax credits because they haven't been taxed by foreign governments in "material amounts," Kerr said.

"In reality, we will see zero benefit from this provision because we already pay ... a large amount of income tax to foreign governments," Kerr told the Fairbanks Daily News-Miner.

The company's worldwide av0erage tax rate is 40 percent, she said. Exxon Mobil also won't see any benefits, she said, because "a significant portion of our unrepatriated earnings is permanently invested in our operations overseas."

Kerr said Exxon Mobil explained this to Knowles campaigners.

The ads continued, however, so Exxon Mobil decided to release Freeman's letter, she said.

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