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2011-05-12 14:03:11
Exxon Mobil Corp. (XOM) Chief Executive Officer Rex W. Tillerson led oil
industry executives in defending $21 billion in U.S. tax breaks that Democrats
say should be eliminated to help reduce the federal deficit.
Executives from Exxon, Royal Dutch Shell Plc (RDSA), Chevron Corp. (CVX),
ConocoPhillips and BP Plc said production costs may rise and gasoline prices
increase if Democrats succeed in stripping the benefits. The plan is
counterproductive, Tillerson told the Senate Finance Committee at a hearing
today in Washington.
Increasing these companies taxes would only discriminate against certain U.S.
workers, make our companies less competitive against others who are in the same
business, and discourage future energy investment, said Tillerson, who also is
Exxon s chairman.
Senate Democrats are proposing to increase oil and gas taxes by $21 billion
over 10 years and use the money to reduce the deficit. Democrats say this would
end unjustified subsidies for profitable companies. Republicans and company
officials say the legislation would impose higher taxes that may lead to higher
gasoline prices for consumers.
We can put this money to better use and we should, Senate Finance Committee
Chairman Max Baucus, a Montana Democrat, said as he opened a hearing with the
executives. The money should be spent to lower the deficit and on clean energy
programs, he said.
Senator Orrin Hatch of Utah, the top Republican on the committee, said
Democratic proposals fail to help increase energy supplies and reduce U.S.
dependence on foreign oil.
Bad Precedent
The reasoning put forth for repealing these tax provisions -- rising gas
prices and reporting higher first quarter profit -- would set a bad precedent
for future tax increases, Hatch said.
The executives defended the tax breaks and urged lawmakers to keep similar
incentives for all energy producers, rather than targeting the five companies.
Singling out five companies because of their size is even more troubling, said
John Watson, Chevron s chairman and CEO. Such measures are anticompetitive
and discriminatory.
Democratic Senators Charles Schumer of New York and Robert Menendez of New
Jersey pressed ConocoPhillips (COP) Chief Executive Officer James Mulva to
apologize for calling their tax change proposal un-American in a statement
yesterday.
Mulva, asked if the company meant the plan s supporters, such as Menendez or
President Barack Obama, aren t patriots, said today the statement wasn t
directed at any lawmaker.
Exxon s Profit
Exxon, the world s largest company by market value, reported a 69 percent
increase in first-quarter profit, the biggest jump in eight years. Net income
rose to $10.7 billion from $6.3 billion a year earlier, Irving, Texas-based
Exxon said on April 28.
After a 29 percent rise in oil prices in the past 12 months, the five companies
don t need tax incentives to invest, Schumer said during a news conference in
Washington yesterday.
You re going to do anything you can to find oil at these prices, Schumer
said, speaking of the five companies.
The legislation, which the full Senate may consider as early as next week,
would increase oil and gas taxes for 10 years, with the cash used to reduce the
U.S. budget deficit.
An increase in taxes for the five oil companies is unlikely to raise gas
prices, which are closely tied to crude oil prices, the Congressional Research
Service said in a report to Senate Democratic Leader Harry Reid of Nevada that
reviewed the effects of five provisions proposed by the Democrats.
Hard To Separate
Political unrest, expectations effects on financial markets, macroeconomic
growth trends, the value of the dollar and a host of other factors have
contributed to fluctuations in the price of oil and gasoline, according to the
report yesterday. Any effect due to changes in the tax treatment of the oil
industry would be hard to separate from the changes due to other factors.
In the House, Democrats introduced legislation that would increase fees on oil
companies if they don t produce in areas where they hold leases. The bills also
would require new safety standards for drilling and promote natural-gas powered
trucks with tax credits.
The Republican-led House yesterday passed legislation that would require U.S.
decisions on drilling permits within 60 days, as a part of an effort to
increase oil production in the Gulf of Mexico.
To contact the reporters on this story: Katarzyna Klimasinska in Wash Dc at
kklimasinska@bloomberg.net; Jim Snyder in Washington at jsnyder24@bloomberg.net
To contact the editor responsible for this story: Larry Liebert at
lliebert@bloomberg.net