U.S. oil major Exxon Mobil Corp XOM-N is suing the European Union in a bid to force it to scrap the bloc’s new windfall tax on oil groups, arguing Brussels exceeded its legal authority by imposing the levy.
Record profits this year by oil companies benefiting from high energy prices have boosted inflation around the world and led to fresh calls to further tax the sector.
The windfall profits tax is “counter-productive,” discourages investments and undermines investor confidence, Exxon spokesperson Casey Norton said on Wednesday. Exxon will factor in the tax as it considers future multibillion-euro investments in Europe’s energy supply and transition, he said.
“Whether we invest here primarily depends on how attractive and globally competitive Europe will be,” Norton said.
The European Commission said it took note of the lawsuit.
“It will be now up to the General Court to rule on this case. The Commission maintains that the measures in question are fully compliant with EU law,” Commission spokeswoman Arianna Podesta said in a statement on Thursday.
Windfall profit taxes imposed by Europe could cost at least $2-billion through the end of 2023, Chief Financial Officer Kathryn Mikells said in a call to analysts on Dec. 8.
Exxon said it invested $3-billion in the past decade in refinery projects in Europe. The projects are helping it deliver more energy products at a time when Europe struggles to reduce its imports from Russia, the company said.
“We will continue to work with EU leaders to address these issues. Thoughtful policy is critical,” the company said.
Chevron Corp CVX-N had also warned that taxing oil production would serve only to reduce energy supply by discouraging company investments.
“That goes against the intent of increasing suppliers and making energy more affordable,” Chevron’s chief financial officer, Pierre Breber, told Reuters in October.
In September, EU countries approved emergency levies on energy firms’ windfall profits which include a levy on fossil fuel companies’ surplus profits made in 2022 or 2023 and another levy on excess revenues that low-cost power producers make from soaring electricity costs.
The EU expects the “temporary solidarity contribution” could generate around €25-billion in public revenues that would be redistributed by EU governments.
“It will ensure that the whole energy sector pays its fair share in these difficult times for many to address the extraordinary energy crisis resulting from the weaponisation of the energy supply by Russia,” the Commission’s Podesta said.