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Oil executives defend profits, tax cuts at Senate hearing

Gasoline prices are driven by forces beyond their control, heads of major oil companies tell lawmakers in arguing against repeal of tax breaks for their firms. 'Don't punish our industry for doing its job well,' one CEO says.

May 12, 2011|By Richard Simon, Washington Bureau
(Alex Brandon/AP )

Reporting from Washington — Amid rising public anger over high gasoline prices, top executives of major oil companies on Thursday defended their actions at a Capitol Hill hearing and fought to block a Democratic effort to scale back their tax breaks.

The Senate Finance Committee asked the heads of the five largest oil companies to testify about proposals to repeal tax breaks. The executives of Exxon Mobil, Shell, ConocoPhillips, BP America and Chevron appeared and immediately found themselves in the expected hot seats.

"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," Sen. Max Baucus (D-Mont.), chairman of the committee, lectured the oilmen.

Chevron Corp. Chief Executive John Watson, however, said: "Don't punish our industry for doing its job well."

Rising energy prices have become a key economic issue, threatening the current recovery, as well as a political one. Democrats have called for an end to the tax breaks as a way of generating income to close the federal budget deficit; the deficit has become a key GOP issue as the 2012 election approaches. House Republicans have generally opposed ending the breaks because they view them as a tax increase.

Events like Thursday's hearing have become a familiar sight when gasoline prices move upward, as they have in recent weeks. The national average for a gallon of regular unleaded is close to $4, and at least 17 states have prices well above that benchmark, according to recent surveys. The oil executives argued that scaling back their tax breaks would unfairly single out their industry and hamper their ability to pursue new energy exploration, jeopardizing jobs and perhaps leading to even higher prices. They also contended their companies weren't to blame for high gas prices.

"Stated simply, oil is a global commodity," Shell Oil Co. President Marvin E. Odum said. "With worldwide economic recovery underway, demand is on the rise, sending prices upward.

"No one person, organization or industry can set the price for crude oil," he said.

The hearing featured the usual political theater: a photo of a dog and pony, displayed by the panel's top Republican, Sen. Orrin Hatch of Utah, his commentary on the Democratic effort to target an unpopular industry.

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

The oilmen's appearance before the Senate Finance Committee came as lawmakers have scrambled to show they feel the public's pain at the pump, even if the odds are against a divided Congress agreeing on any major legislation that would provide immediate relief.

The Republican-controlled House on Thursday was poised to approve a bill that would require lease sales within five years for drilling in areas off Southern California, the East Coast and Alaska and speed up permitting for energy exploration in the Gulf of Mexico.

Democratic senators are pushing to scale back $2 billion a year in tax breaks to the five major oil companies and steer the savings into reducing the federal deficit, an effort aimed at winning the support of budget-cutting Republicans.

But the measure faces resistance, not only from many Republicans who say the tax incentives are necessary to encourage domestic oil production, but also from oil-state Democrats.

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, a nonpartisan watchdog.

Sen. Ron Wyden (D-Ore.) played a video of a 2005 hearing in which oil company executives said they did not need incentives to encourage oil exploration when oil was above $55 a barrel.

"If your company didn't need incentives to drill for oil at $55 a barrel, how in the world can you possibly need incentives when oil is at $100 a barrel?" Wyden asked.

ConocoPhillips CEO James Mulva said that companies should receive tax breaks available to other industries.

While Wyden brought his own video, Sen. Pat Roberts (R-Kan.) played a clip of President Obama, in a trip to Brazil earlier this year, cheering the discovery of oil off that country's shores, something that Republicans have sought to use to criticize the administration for not doing more to promote domestic energy production.

Other Democrats questioned a recent press release from ConocoPhillips that assailed the tax repeals as "un-American.''

"Did you really mean to question my patriotism?'' Sen. Robert Menendez (D-N.J.) asked Mulva. "Do you believe that President Obama is un-American because he has proposed cutting oil subsidies?"

Mulva replied that "nothing was intended to be personally directed to you.''

Sen. Jay Rockefeller (D-W.Va.) questioned whether the oil executives really felt in danger during the hearings, because they have a history of winning what they want from Congress.

"Not once during the hearing have I heard any semblance of willing to share," Rockefeller said. "I haven't heard about what anybody would be willing to do about our budget problems. Everybody has to lose at some time. Everybody has to give something up."

richard.simon@latimes.com

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