The 12,000-barrel oil spill carried by Exxon Mobile’s Pegasus pipeline in central Arkansas last week has brought to light a current tax loophole that oil and gas giants are abusing. A legal technicality states that the transportation of a certain type of crude oil — the oil used in Exxon’s pipeline and the same oil being used for the Keystone XL Pipeline — does not require a payment into the Oil Spill Liability Trust Fund.

Exxon, like all companies that transport oil, is required to pay eight cents into the OSLTF for every barrel they transport. However, the oil spilled is classified as tar sands, an unconventional oil, and is exempt from this tax. The corporation has refused to reveal the amount they pay to the fund, or the value of the non-oil oil they transport.

This loophole could be costing the OSLTF millions of dollars. The controversial Keystone Pipeline will reportedly transport around 590,000 barrels of this tar sands oil per day, tax-free. That alone is almost $50,000 a day that Big Oil will be pocketing instead of paying into the fund. No one knows the exact amount of money that oil companies are saving from this loophole because they are not obligated to divulge that information.

For years, oil companies have been profiting from this loophole, skirting a tax that was intended to protect the communities that the companies pass through to transport their product. Exxon’s response agreeing to cover all cleanup costs is meant to appease the local community and divert attention from the loophole. Yet the law still exempts Exxon and other energy companies from liabilities related to this type of spill, even though tar sands crude oil inflicts the same costs and environmental hazards as any other type of oil. This demonstrates a lack of social conscience from large oil firms, as well as a governmental failure to protect its citizens.


Exemptions like these represent the worst part of our political system. They arise because oil companies save money, policymakers are paid by lobbyists not to worry about it and the public never hears about it. Americans distrust Congress because of these backroom deals. Closing this loophole and others like it would save the government money and send a message to the public that Congress truly wants to be by the people, for the people.

A version of this article appeared in the April 4th, 2013 print issue. Email the WSN Editorial Board at [email protected]