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Senate grills oil executives over high gas prices

The oilmen say they're not to blame and object to a proposal by Senate Democrats to scale back the industry's tax breaks.

May 12, 2011|By Richard Simon, Washington Bureau
  • Exxon Mobil Chairman and Chief Executive Rex Tillerson, foregound, accompanied by fellow oilmen, testifies before the Senate Finance Committee.
Exxon Mobil Chairman and Chief Executive Rex Tillerson, foregound, accompanied… (J. Scott Applewhite, AP )

Reporting from Washington — Amid rising public anger over high gasoline prices, oil company executives defended their industry at a contentious Capitol Hill hearing Thursday and fought a Democratic drive to scale back their tax breaks.

"Given profits of $35 billion in just the first quarter alone, it's hard to find evidence that repealing these subsidies would cut domestic production or cause layoffs," Senate Finance Committee Chairman Max Baucus (D-Mont.) told the oilmen.

The atmosphere was friendlier for the industry on the other side of the Capitol, where the Republican-controlled House approved a third bill in a week to expand offshore drilling.

The bill would require the Interior Department to offer leases within five years for new drilling in areas off Southern California, the East Coast and Alaska. The measure, opposed by the White House, has little chance of passing in the Democratic-controlled Senate.

The activity underscored the heightened political anxiety over gas prices.

Lawmakers are scrambling to respond to the high prices — from staging news conferences at gas stations to introducing bills with names like the Consumer Relief for Pain at the Pump Act — even if there is little they can do to provide immediate relief. They also are eager to highlight their parties' differences over energy policy and provide fodder for 2012 campaign ads.

At the Senate hearing, Sen. John D. Rockefeller IV (D-W.Va.), great-grandson of Standard Oil's founder, accused the oil executives of being "deeply, profoundly out of touch" with ordinary Americans, unwilling to engage in the shared sacrifices that loom as Congress considers deep spending cuts.

Chevron Chief Executive John Watson, sharing the hot seat with executives from Exxon Mobil, Shell, ConocoPhillips and BP America, told senators, "Don't punish our industry for doing its job well."

The oilmen, a familiar sight at congressional grillings when gas prices move upward, argued that scaling back their tax breaks would unfairly single out their industry, hamper their ability to pursue new energy supplies and put jobs at risk.

The Senate could vote as early as next week on a proposal to scale back, over a decade, $21 billion in tax breaks to the five major oil companies. Democrats have proposed steering the savings into reducing the federal deficit, an effort aimed at winning the support of budget-minded Republicans.

The oil executives said they weren't to blame for high gas prices.

"Simply stated, oil is a global commodity," said Shell President Marvin E. Odum.

The hearing featured the usual theater: a photo of a dog and pony, displayed by the panel's top Republican, Sen. Orrin G. Hatch of Utah, who dismissed the session as a political show.

"Americans are rightly upset about the cost of gasoline," Hatch said. "And the solution being offered here? Let's raise some taxes."

Sen. Robert Menendez (D-N.J.) assailed ConocoPhillips for issuing a news release criticizing repeal of the tax breaks as "un-American."

ConocoPhillips executive James J. Mulva responded that nothing personal was intended.

Previous efforts to scale back industry subsidies have been defeated in the face of heavy lobbying by the oil and gas industries, which spent more than $145 million and employed 798 lobbyists to influence lawmakers last year, according to the Center for Responsive Politics.

The House bill to require drilling lease sales within five years in coastal areas "with the most prospective oil and gas resources," including areas off Southern California, passed 243 to 179.

The California delegation split along party lines, with Republicans in support and Democrats in opposition, except for Jim Costa of Fresno, who voted for the measure. Rep. Brian P. Bilbray (R-Carlsbad) did not vote but issued a statement saying he opposed the measure because it would deny California and other states the right "to decide if offshore drilling takes place on their coasts."

Offshore drilling has long been a contentious issue in California, where a 1969 spill off Santa Barbara devastated the coast. A longstanding ban on new drilling off much of the nation's coast expired in late 2008 — after high gas prices became a hot issue.

The House also has approved bills to open the Virginia coast to energy exploration and expand and accelerate drilling in the Gulf of Mexico.

"Some are asking, will we get to $5 gas prices? If you come to my district, we are already there," Rep. Jeff Denham (R-Atwater) said in support of the measure.

"Ignore the spill. Drill, baby, drill," Rep. Rush D. Holt (D-N.J.) said sarcastically, objecting to expanded drilling when Congress has yet to enact new safeguards in response to last year's massive gulf spill.

richard.simon@latimes.com

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