Big Oil execs hit back on tax proposal

@CNNMoney May 12, 2011: 3:06 PM ET
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Republican Orrin Hatch called Thursday's hearing a dog and pony show, a point he drove home with a visual aid.

NEW YORK (CNNMoney) -- Dragged before Congress as gas prices explode at the pump, oil executives mounted a vigorous defense of their business practices on Thursday -- pushing back against plans to eliminate tax breaks for the "big five" oil and gas companies.

All five executives acknowledged rising prices at the pump, but much of their testimony focused on the impact of a plan floated by Senate Democrats that would eliminate a raft of tax breaks.

Dubbed the Close Big Oil Tax Loopholes Act, the bill would eliminate tax subsidies for just the five largest oil companies and direct those savings to pay down the deficit. Total deficit reduction: $21 billion over 10 years.

Rex Tillerson, CEO of Exxon Mobil (XOM, Fortune 500), called the tax proposal "misinformed," "discriminatory" and "counterproductive."

Shell (RDSA) President Marvin Odum also voiced opposition.

"It can be tempting to assume that there is something to gain by taking more from a few," Odum said. "However, one must also balance the potential implications of increased industry costs on both supply and price."

Chevron (CVX, Fortune 500) CEO John Watson, BP (BP) America Chairman Lamar McKay and ConocoPhillips (COP, Fortune 500) CEO Jim Mulva also testified before the Senate Finance Committee.

The bill has virtually no chance of winning congressional approval, and analysts see it as a move designed to put Republicans on the defensive and capitalize on public anger over rising gas prices.

Questioned about whether the tax breaks are essential to promote exploration, each executive admitted they are not but said the subsidies are similar to those enjoyed by other industries.

Big Oil's $38 billion defense

As for gasoline prices, the oil execs said they have little control over prices at the pump and are instead at the mercy of fluctuations in the price of crude oil.

"Everything from the weather to politics and the global economy determines the price of oil and the fuels made from it," Odum said in prepared testimony. "No one person, organization or industry can 'set' the price for crude oil."

At points, the back and forth turned personal.

Democratic Sens. Chuck Schumer and Robert Menendez blasted Mulva for his company's use of the word "un-American" to describe the Democratic proposal in a press release.

"You classify [the proposal] as un-American. That means those who promote [the proposal] are un-American," Menendez said. "I think that is just beyond the pale."

While the ConocoPhillips statement made no mention of the senators by name, Menendez said using the word cast "an aspersion upon all of us who have a different view."

Americans blame oil companies, speculators for prices

Mulva did not apologize. Instead, he argued that singling out only five companies was discriminatory. He said the word was not intended to describe the senators personally.

And Sen. Jay Rockefeller, the great grandson of Standard Oil tycoon John D. Rockefeller, said the assembled executives were "deeply, profoundly, out of touch."

Noting that Congress now faces tough choices on the budget, Rockefeller said the oil companies do not seem willing to contribute anything by way of shared sacrifice.

Chevron's Watson took exception.

"I don't think the American people want shared sacrifice," Watson said. "I think they want shared prosperity."

"Oh, a lovely statement, but do you understand how out of touch that is?" Rockefeller asked.

And only minutes later, Tillerson denied that was the case.

"Senator, I want to assure you, I am not out of touch. At all," Tillerson said. "And we do see the big picture."

At its core, the hearing was pure political theater, a fact acknowledged by Republican Sen. Orrin Hatch, who called it a dog and pony show during his opening remarks.

"This hearing should not be used to score cheap political points, but I am afraid ... that's what we are going to see here today," Hatch said.

Others disagreed, and also invoked wildlife -- this time of the mythical variety.

"One of my colleagues suggested that this hearing is nothing more than a dog and pony show," Schumer said. "Well you would have an easier time convincing the American people that a unicorn just flew into this hearing room than that these big oil companies need taxpayer subsidies. That's the real fairy tale."  To top of page

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