Devon Energy had a big 2020. In March, it received a gift from Congress: the reopening of a tax loophole, as part of pandemic stimulus, that would eventually net Devon $220 million. In September, it announced a multi-billion dollar deal to acquire competitor WPX Energy. In October, Devon paid a “special dividend” of $100 million — part of $257 million in dividends it handed to its shareholders last year.
And somewhere in there, Devon, an Oklahoma-based oil and gas explorer, found time to eliminate 400 jobs, about 22% of its workforce, securities filings show.
Devon’s $220 million tax bailout easily paid for the $117 million cost of boosting its dividend over the $140 million it paid out in 2019. That 84% dividend boost may have softened the blow of Devon’s plunging share price, which closed 37% lower on the year.
Although an extreme example, Devon is not alone in diverting taxpayer bailouts to its shareholders while laying workers off. Among the 15 oil and gas companies that received more than $100 million as a result of a tax loophole reopened by the CARES Act stimulus law last year, more than half increased spending on the dividends paid to their shareholders — and all but two shed jobs, a BailoutWatch analysis of their securities filings has found.
Among those that boosted their dividends, all but one easily covered the increases out of their tax bailout money. And all but one cut jobs. These companies are: Marathon Petroleum, Phillips 66, Vistra Corp, Valero, DTE Energy, Devon Energy, and Baker Hughes. (The outlier is EOG Resources, whose $150 million tax bailout accounts for just part of the additional $246 million it gave to shareholders. EOG’s employment was flat for 2020.)
The disclosures come amid a rising debate between President Joe Biden, who has proposed ending fossil fuels’ tax subsidies to help pay for his $2 trillion infrastructure proposal, and claims by the industry that it receives “no special tax treatment.”
BailoutWatch reported previously that 77 polluters pocketed a tax bailout worth $8.24 billion and laid off nearly 60,000 employees. These results, reflecting actions by 15 companies that collected the bulk of that bailout, lay bare the industry’s priorities: Paying investors enough to keep them interested while consolidating ownership as profits and demand for its products dwindle.
Companies typically use dividends to reward shareholders when business is strong and there is more than enough money to cover their obligations and invest in their growth. U.S. companies as a whole reduced their dividends in 2020 as the pandemic roiled the economy. Because of their $100 billion-plus tax bailouts, these eight companies were able to increase shareholder payouts by $769 million. Their $5.42 billion in tax bailouts covered nearly two-thirds of the $7.33 billion they paid out in dividends last year.
Devon Energy’s “capital allocation decisions” are based in large part on “growing our shareholder dividend,” according to the company’s 2020 annual report.
Fossil fuels’ direct federal subsidies total around $15 billion annually, House and Senate Democrats said last year in introducing the End Polluter Welfare Act. The law, sponsored by Democratic Rep. Ilhan Omar and Independent Sen. Bernie Sanders, aimed to close tax loopholes and eliminate other federal subsidies for polluters. With Republicans in control of both houses, EPWA was never put to a vote.
President Biden has revived the idea. His infrastructure proposal includes eliminating tax preferences for fossil fuels and making sure polluting industries pay to clean up their own messes. It notes that the current tax regime “contains billions in subsidies, loopholes, and special foreign tax credits'' that serve to prop up coal, oil, and gas companies.
The tax bailout was a result of two changes in the 2020 CARES Act stimulus law affecting how corporations account for past losses and their access to certain credits. The change technically covered all industries, but coal, oil, and gas saw vastly more benefits because of widespread recent losses driven by falling demand and volatile oil prices.