Complaint regarding the Norwegian Petroleum Taxation Act of 1975, as amended in 2005 with regards to the up-front cash flow reimbursement scheme for all direct and indirect exploration expenses.
Bellona made a complaint about the Norwegian state to ESA (EFTA Surveillance Authority), in order to put an end to favorable sponsorship of oil and gas companies. Over a ten-year period, Norway has sponsored the oil and gas exploration expenses of non-tax-paying companies with over 90 billion Norwegian kroner (NOK, 9.7 billion Euro).
The complaint focuses on the specific provision regarding the up-front cash flow reimbursement of fossil exploration activities, which Bellona deems to be in breach of Article 61 of the EEA Agreement. The state subsidises all oil companies by allowing them to take 78% of their exploration costs and deduct this from their taxable income.
Companies that do not have any taxable profit get the 78 % paid directly in cash by the state. This has so far amounted to over 90 billion NOK. In 2015 alone, the Norwegian government paid 13,3 billion NOK (1.4 billion Euro) in tax reimbursement to the petroleum sector, divided between 39 companies.
The Norwegian tax regime for oil and gas exploration consists of a wide range of advantageous write off and deduction schemes. On top of the generous reimbursement for exploration costs, other benefits put the oil and gas sector in a massively preferential position compared to competing energy industries.
“The state is taking large risks and is gambling with taxpayers’ money. The goal has been to stimulate more exploration, but at the same time it implies a big danger of major payouts without any gain afterwards”, comments Bellona president Frederic Hauge. Bellona’s goal is to make oil and gas exploration less attractive, especially in the environmentally sensitive areas in the north. The last two licensing rounds have just opened these areas, full of rich seabird and fish habitats, for exploration.