Exxon sues over EU fossil fuel ‘windfall tax’
U.S. oil giant ExxonMobil has challenged the European Commission’s proposal to levy excess profits from European Union-based oil and gas firms at the General Court of the EU, the company said Wednesday.
The lawsuit — filed through subsidiaries in Germany and the Netherlands — argues that the measure is a tax, which is a right reserved for national governments, and contests the use of the EU Treaty’s Article 122, an emergency procedure that excludes the European Parliament, to enact the legislation.
Under Article 122, the Commission initiates a legislative proposal, but it is the Council that adopts the measure via a qualified majority vote of EU member countries.
“Our affiliates, ExxonMobil Producing Netherlands BV and Mobil Erdgas-Erdöl GmbH, are suing the European Council in a bid to annul a new windfall tax on oil and gas companies,” said ExxonMobil spokesman Casey Norton in Texas.
EU countries in September passed an emergency package of legislation aimed at tackling soaring energy prices. It included a temporary minimum 33 percent tax — dubbed a “solitary contribution” — on profits for fossil fuel and refinery companies that exceed a four-year historical average by 20 percent. The relevant profits could be from fiscal years 2022 or 2023, depending on the country.
“This litigation is driven by our concern about the unintended long-term effects of this policy on the competitiveness of European industry,” the spokesman said via email. “This tax will undermine investor confidence, discourage investment, and increase reliance on imported energy and fuel products.”
The suit does not prevent the legislation from taking effect — and without any time limits on the court to decide the case, it could be years before a judgment is pronounced.
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The legislative package at issue also includes taxes dubbed “revenue limits” for electricity generators and financial relief for certain retail consumers.
“The Commission maintains that the measures in question are fully compliant with EU law,” said Arianna Podestà, a Commission spokesperson. In an email, she added that the measure aims to “ensure the whole energy sector pays its fair share in these difficult times for many to address the extraordinary energy crisis resulting from the weaponisation of the energy supply by Russia.”
The Commission estimates the temporary measure could bring in up to €25 billion, to be redistributed by member countries.
“We recognize that the energy crisis in Europe is weighing heavily on families and businesses, and we’ve been working to increase energy supplies to Europe,” ExxonMobil’s Norton said. “Our challenge is targeted only at the counter-productive windfall profits tax, and not any other elements of the package to reduce energy prices.”
The case concerns one of the first instances of the EU’s use of the emergency Article 122 for energy legislation, potentially making it a test case.
“The windfall tax will not remedy any shortage of energy supply and cannot realistically achieve a timely impact, so the European Commission and Council were wrong to use exceptional powers under Article 122(1) TFEU to speed its approval,” Norton added.
EU countries have also used the emergency procedure to mandate minimum natural gas storage levels, cuts in winter electricity and gas use, the joint purchasing of gas supplies, and a maximum cap on wholesale natural gas prices within the bloc.
“ExxonMobil has been one of the largest investors in European refining over the last ten years, investing more than $3 billion in major refinery projects,” said Norton, adding that “future [multibillion-euro] investments in Europe’s energy supply and transition” would “depend on how attractive and globally competitive Europe will be,” and warning EU lawmakers to stick to “thoughtful policy … at a time when Europe struggles to reduce its energy imports from Russia.”
The European Council did not respond to a request for comment.
Source: Politico
