National Fuel Skips Out on Taxes, Makes Life Miserable in Pendleton

As a utility, a kind of quasi-public agency existing to provide an essential service to the people of the region, National Fuel enjoys many benefits not afforded to other companies or individuals under the law. For the most part, the privately held and disgustingly lucrative corporation doesn’t have to pay any taxes.  And some of their major projects – including construction of a 22,000 horsepower compression station and pipeline in Pendleton, will not benefit anyone in the region, something even company executives admit.

In a part of the country known for its’ brutal winter weather conditions, it can certainly be argued that National Fuel’s core mission – providing natural gas to the people of the Niagara Frontier – is indeed essential, in much the same way that, given the economic plight and crushing poverty of the region, dollar menu fast food is essential.

The difference being, of course, that McDonald’s and Burger King pay their taxes.

Fracking is illegal in New York State because of widespread concern about its effect on groundwater and the potentially cancer causing chemicals that are released when Marcellus shale common to the region is compressed to extract natural gas.

It’s quite legal in Pennsylvania though, and National Fuel does quite a bit of it there. Now, having found Canadian buyers waiting eagerly for their controversial product, the energy giant is cutting a swath across Western New York to lay pipe, and building the massive compression station in Pendleton and a related dehydrator in Wheatfield.

Niagara County residents whose lives will be disrupted by the construction and its aftermath will not benefit one iota from the project. Paula Morgan, who works with a grassroots organization called the Pendleton Action Team to fight construction of the compression station, charged that federal, state and local government officials seem to be eagerly bending over and waiting their turn to help the project along.

“One comment that keeps coming up from all the politician’s offices is they have to ‘be careful, because National Fuel are one of the largest employers in Western New York.’” Morgan told the Niagara Falls Reporter. “One of the largest employers, who seems to have one of their executives on every Chamber of Commerce and IDA in the region, and arranging for donations to many of the campaigns of local, state and federal politicians. “

Thus far, she admits, the battle has seemed pretty one sided.

“Such good corporate citizens, who not only have a team of lawyers and political action folks, but a team of accountants making sure they don't pay their share of taxes,” Morgan said.

National Fuel is one of Western New York’s largest companies, consistently reporting revenues of nearly $2 billion and operating profits in excess of $200 million each year. Even in the depths of the recession, as many Western New Yorkers have struggled to deal with poor economic prospects or left the region altogether, the gas company has remained consistently profitable.

Given its size and profitability, National Fuel can certainly afford to pay its fair share in income taxes. But the following report shows that National Fuel has actually paid next to nothing in state and federal income taxes over the past three years, in some cases using the tax code to its advantage in order to pay negative income tax rates. The result: one of the region’s most profitable companies has scored over $400 million in state and federal income tax subsidies from 2009 to 2011.