ExxonMobil CEO Darren Woods delivers a speech in June 2017. Photo: Sefa Karacan / Anadolu Agency / Getty Images)
Oil-and-gas behemoth ExxonMobil's newly announced plan to invest $50 billion in the U.S. over five years became quickly entangled in Beltway politics Monday — with an assist from the company itself.
Why it matters: Top Republicans, going further than the company's announcement, promoted the spending as a direct result of the new tax overhaul. The messaging burst shows how business decisions are now tethered to the volatile politics of the GOP's biggest win of the Trump era.
What Exxon said: Exxon CEO Darren Woods' short blog post announcing the plan is titled "Tax and regulatory reform’s economic boon." But he writes that the investments are "enhanced by the historic tax reform recently signed into law." (emphasis added.)
- That's a clearly positive but also rather careful statement about the effects of the GOP tax overhaul, which includes cuts to the corporate rate from 35% to 21%.
But top Republicans went much further:
- "The world's largest publicly traded company, @exxonmobil, plans to invest $50 billion in US over 5 years thanks to #TaxReform and the #TaxCutsandJobsAct," Senate Majority Leader Mitch McConnell tweeted.
- House Speaker Paul Ryan issued a press release titled, "ExxonMobil to Invest an Additional $50 Billion in the U.S. Due to Tax Reform" (though the release quoted Exxon's less categorical statement.)
- House Majority Whip Steve Scalise tweeted that "@ExxonMobil is pumping $50,000,000,000 into the economy because of tax cuts."
Reality check: The picture is more complicated. Tax rules are one of multiple factors, including oil prices that are again trending upward, that influence capital spending plans and the underlying economics of project decisions.
- And planning horizons for multi-billion dollar investments are very long compared to the young age of a tax deal struck just a month ago.
By the numbers: More than $35 billion of the spending is from projects that have not been previously announced, according to Exxon spokesman Scott Silvestri. But, as the Wall Street Journal points out, company did not detail how much of the new spending decisions were linked to the tax changes.
What's next: Analysts will be looking for specifics on the spending plan. Overall, Woods touted the company's efforts in the Permian basin, where the company has been expanding its operations and also plans to "improve infrastructure and build new manufacturing sites."
- Woods said it comes on top of a planned $20 billion, 10-year build out of refining, petrochemical and LNG projects and project expansions along the Gulf Coast.
- And going forward, he said the new tax law might influence other project decisions.
"We’re actively evaluating the impact of the lower tax rate on the economics of several other projects currently in the planning stages to further expand our facilities along the Gulf Coast."
Go deeper: Bloomberg puts the numbers in context here, noting that the newly announced spending "basically just returns the investment program to 2012-2016 levels, when crude prices peaked."
Amy Harder contributed.