US Senators blast majors' executives for defending tax deductions

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, May 12 -- Democrats on the US Senate Finance Committee accused executives from five major oil companies of being badly out of touch with the American people for not being willing to surrender tax deductions in an effort to reduce the federal budget deficit. Doing away with the oil and gas industry’s use of deductions, which essentially would remain available to other businesses, would do much more harm than good, the executives responded.

The May 12 hearing came 2 days after Robert Menendez (NJ) and three other Senate Democrats introduced a bill aimed at raising $21 billion over 10 years to help reduce the national budget deficit by closing what the lawmakers consider federal tax loopholes for the oil and gas industry. It quickly gained Senate Majority Leader Harry M. Reid’s (D-Nev.) support and could come to a vote in another week.

Finance Committee Chairman Max Baucus (D-Mont.) said in his opening statement at the hearing that US families are expected to each pay about $825 more for gasoline in 2011 than they did in 2010, while the five largest US oil companies are expected to have their most profitable year ever. “Businesses should make a profit—that’s what drives our economy—but do these very profitable companies actually need taxpayer subsidies?” he asked.

Committee member John D. Rockefeller IV (D-W.Va.) went further and lectured the witnesses. “I get the feeling that the five of you are almost like Saudi Arabia,” he told them. “You get caught up in your profits and can’t understand the concept of sharing. You seem out of touch not only with what we’re trying to do, but also with the American people. I don’t think you have any idea what the size of your profits does to their ability to accept what you say.”

Not ‘out of touch’
The witnesses immediately disagreed with him. “I’m not out of touch at all. We understand the problems of dealing with this huge deficit,” responded ExxonMobil Corp. Chief Executive Rex W. Tillerson. John W. Watson, his counterpart at Chevron Corp., said that he thought the American people preferred shared prosperity to shared sacrifices.

“We feel like we’re constrained and restricted from our opportunities,” added ConocoPhillips Chief Executive James J. Mulva, adding, “We’re in a noble industry that has contributed a lot to our standard of living. We’re not looking for incentives; we want to get back to work.”

They and the two other witnesses—BP America Inc. Chairman and Pres. H. LaMar McKay and Shell Oil Co. Pres. Marvin Odum—emphasized that the tax code provisions targeted by Menendez’s bill are deductions available to other industries. This is particularly true of the Section 199 deduction designed to help US manufacturers compete with foreign firms that receive subsidies from their home governments, they said. The oil and gas industry already deducts less—6% instead of the 9% other US manufacturers receive—under the law currently. Menendez’s bill would completely eliminate the deduction for the US oil and gas industry.

That approach discriminates in other ways because it doesn’t affect foreign oil companies with significant US operations, Tillerson pointed out. The same is true with the bill’s proposal to modify the dual capacity provision under the foreign tax credit, he indicated. “This is one area when you won’t find the five companies at this table aligned because two of them are foreign companies which operate under a territorial tax system in their home countries,” the ExxonMobil executive said. “What we’d like is a level playing field.”

Sen. Orrin G. Hatch (R-Utah), the committee’s ranking minority member, questioned the bill’s motives. “Nothing makes for a ‘kumbaya moment’ like high gasoline prices,” he said in his opening statement. “Republicans don’t like paying them any more than Democrats do. With one voice, Americans are telling us to do something about them. Unfortunately, for some people, the political philosophy of [former Obama White House Chief of Staff Rahm Emanuel] is too hard to resist: Never let a crisis go to waste. Faced with an issue of legitimate concern, politicians and their media allies decided to exploit high [gasoline] prices for political gain.”

When committee member Ron Wyden (D-Ore.) suggested that US companies using the foreign tax credit’s dual capacity provision might be trying to disguise some royalties as foreign taxes, the witnesses from the three US-based companies said the US Internal Revenue Service requires submission of detailed information to prevent this. Wyden was not convinced.

“I think the greatest travesty for this country is that we don’t even have an energy policy,” Olympia J. Snowe (R-Me.) observed. “I don’t know how many crises have to occur to prompt a president and Congress to develop one. We hold multiple hearings, but they don’t result in any action. We’ve let down the American people.” Congress should examine all the federal tax code’s incentives, she continued. “Frankly, a lot of them have been put on cruise control, and I hope we hold more hearings about them,” she said. “The real issue is the effectiveness of the incentives we provide your industry and what they provide the American consumer.”

Contact Nick Snow at nicks@pennwell.com.

Related Articles

PHMSA proposes pipeline accident notification regulations

07/02/2015 The US Pipeline and Hazardous Materials Safety Administration has proposed new federal oil and gas pipeline accident and notification regulations. ...

FourPoint Energy to acquire Anadarko basin assets from Chesapeake

07/02/2015 FourPoint Energy LLC, a privately owned Denver company, plans to acquire oil and gas assets from Chesapeake Energy Corp. subsidiaries Chesapeake Ex...

Puma Energy completes purchase of Murco’s UK refinery, terminals

07/02/2015 Singapore-based Puma Energy Group Pte. has completed its purchase of UK midstream and downstream assets from Murco Petroleum Ltd., a subsidiary of ...

BP to settle federal, state Deepwater Horizon claims for $18.7 billion

07/02/2015 BP Exploration & Production Inc. has agreed in principle to settle all federal and state claims arising from the 2010 Deepwater Horizon inciden...

MARKET WATCH: NYMEX oil prices plummet on crude inventory build, Iran deadline extension

07/02/2015 Oil prices plummeted more than $2/bbl July 1 to settle at a 2-month low on the New York market after a weekly government report showed the first ri...

API to issue recommended practice to address pipeline safety

07/01/2015 The American Petroleum Institute expects to issue a new recommended practice in another few weeks that addresses pipeline safety issues, but the tr...

Shell Midstream Partners takes interest in Poseidon oil pipeline

07/01/2015 Shell Midstream Partners LP has completed its acquisition of 36% equity interest in Poseidon Oil Pipeline Co. LLC from Equilon Enterprises LLC, a s...

MARKET WATCH: Oil prices decline as US crude inventories post first gain in 9 weeks

07/01/2015 Oil prices on July 1 surrendered much of their gains from the day before after the release of a government report showing the first rise in US crud...

FWS issues Shell letter of authorization on Chukchi Sea lease

07/01/2015 The US Fish & Wildlife Service issued Shell Gulf of Mexico Inc. a letter of authorization (LOA) related to the potential disturbance of polar b...
White Papers

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by
Available Webcasts


OGJ's Midyear Forecast 2015

When Fri, Jul 10, 2015

This webcast is to be presented by OGJ Editor Bob Tippee and Senior Economic Editor Conglin Xu.  They will summarize the Midyear Forecast projections in key categories, note important changes from January’s forecasts, and examine reasons for the adjustments.

register:WEBCAST


Predictive Analytics in your digital oilfield - Optimize Production Yield and Reduce Operational Costs

When Tue, Jul 7, 2015

Putting predictive analytics to work in your oilfield can help you anticipate failures, plan and schedule work in advance, eliminate emergency work and catastrophic failures, and at the same time you can optimize working capital and improve resource utilization.  When you apply analytic capabilities to critical production assets it is possible to reduce non-productive time and increase your yield.

Learn how IBM's analytics capabilities can be applied to critical production assets with the goal of reducing non-productive time, increasing yield and reducing operations costs.

register:WEBCAST



On Demand

Cognitive Solutions for Upstream Oil and Gas

Fri, Jun 12, 2015

The oil & gas sector is under pressure on all sides. Reserves are limited and it’s becoming increasingly expensive to find and extract new resources. Margins are already being squeezed in an industry where one wrong decision can cost millions. Analyzing data used in energy exploration can save millions of dollars as we develop ways to predict where and how to extract the world’s massive energy reserves.

This session with IBM Subject Matter Experts will discuss how IBM Cognitive Solutions contribute to the oil and gas industry using predictive analytics and cognitive computing, as well as real time streaming for exploration and drilling.

register:WEBCAST


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected