Oil CEOs warn senators of downside to axing industry tax breaks
Five oil CEOs testified Thursday that a Senate bill to shrink their companies' tax breaks would mean less domestic oil production and higher gasoline prices. Democrats cite firms' big profits.
Soaring gasoline prices and trillion-plus federal deficits set the stage for a dramatic standoff Thursday between Senate Democrats and top oil company executives who vigorously defended billions in annual tax breaks for the oil industry.Skip to next paragraph
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At issue is whether the Big Five oil companies – which together made more than $35 billion in profits in the first quarter of 2011 – need help from taxpayers, especially with oil selling for more than $100 a barrel.
“Businesses should make a profit – that’s what drives our economy. But do these very profitable companies actually need taxpayer subsidies?” said Sen. Max Baucus (D) of Montana, chairman of the Finance Committee, in his opening statement. “We can put this money to better use.”
Legislation pending in the Senate would cut tax breaks to the top oil producers by $21 billion over 10 years – and use the savings to reduce the national deficit. Industry CEOs say such a move would be discriminatory and would hurt US jobs and their ability to compete for resources with giant, state-owned rivals.
The CEOs represented companies ranging from Exxon Mobil, which made $10.7 billion in profit in the quarter ending March 31, to BP America, which is still recovering from the Gulf oil spill. Others included Chevron, Conoco Philips, and the US branch of Royal Dutch Shell. [Editor's note: The original version misstated Exxon Mobil's profits.]
The CEOs asserted that the proposed tax changes would discourage domestic production, cut jobs, and raise the costs of energy to American consumers.
“It is not simply that [the proposed tax changes] are misinformed and discriminatory. They are counterproductive,” said Exxon Mobil CEO Rex Tillerson. The way to reduce energy prices and raise revenue for government is to lift restrictions on developing “our nation’s enormous untapped energy supplies,” he added.
Shell CEO Marvin Odum cited examples of how US regulatory policy curbed the development of new energy resources, especially in Alaska and the Gulf. “At the invitation of the federal government, we have invested more than $3.5 billion since 2005 to develop energy resources in Alaska,” he said. “Six years later, we have been prevented from drilling a single exploration well due to the government’s inability to deliver timely permits to allow this potential resource to be developed."
Questions from the panel reinforced partisan themes. Republicans, whose ranks were depleted because several members were at the White House to discuss deficits and debt, focused on the need for a national energy policy. Sen. Orrin Hatch (R) of Utah, the top Republican on the panel, dubbed the hearings a stunt to raise taxes and score political points.
“No matter what the question is, it seems that for the president and some of my colleagues, the answer is always raise taxes,” he said. “Oil and gas companies would probably drill with or without these tax incentives. But let’s be clear: They would be less likely to do so in the United States.”