Big Hearing on Federal Tax Breaks for Big Oil
Posted May 12, 2011
12:38 I gather the hearing ended shortly after I left. Thanks so much for tuning in!
12:00 Taking a brief break, be back soon.
11:55 Wonder when any one of these guys last pumped gas? Rockefeller (D-WV), to his credit, is representing taxpayers with his line of questioning regarding the lack of awareness these guys have about the country's fiscal pain, and that their tax breaks need to be on the table as a way to cut the deficit.
11:52 Rockefeller (D-WV) "I really do think you are out of touch." He points out that one reason this might be so is that the industry has an army of lobbyists tasked with protecting oil subsidies. "You always win." Will this time be different? We need to cut the deficit!
11:46 Cardin (D-MD) is up now, and pointing out again how tiny a percentage of their profits the subsidies represent (he says three percent), to which Hatch says he just wants fairness and not burdening oil companies because we "hate" them. (incidentally, former Shell CEO John Hofmeister who has said the companies don't need breaks when profits are high wrote a book "Why Americans Hate the Oil Companies").
11:44 Wyden (D-OR) asks why these companies deserve an ethanol tax credit (which also costs us taxpayers big bucks at $6 billion per year, and unbeknownst to many does benefit Big Oil companies), and to his credit McKay says it should be phased out except for advanced (i.e., cleaner) biofuels. We need to phase out dirty energy subsidies.
11:40 Hatch (R-UT) asks "why are we here" if removing oil subsidies would lower prices at the pump. He seems foggy-headed about the fact that he's on the FINANCE Committee which is working to cut the deficit. THAT'S why these guys, who represent taxpayers, are talking today.
11:38 Hatch (R-UT) throws out another red herring -- the five companies represent a small percentage of global production compared to others, especially national oil companies (OPEC, which is comprised of these, controls 40 percent of global production capacity). This is true -- "Big Oil" has been overshadowed by "Bigger Oil," namely OPEC. But it is irrelevant to the oil subsidies issue!
11:35 Hatch (R-UT) is now up defending the oil tax breaks, and throwing out another red herring by citing another proposal that would yield taxpayers savings I suppose claiming that means the oil breaks deserve less scrutiny (for the record he got $113,850 in campaign donations from the oil and gas industry last year).
11:32 Baucus (D-MT) is now diving more deeply into tax reform.
11:29 Tillerson claims that "we love to compete" yet the transportation fuel marketplace is about 95 percent dependent on oil. It is a monoculture, and these guys spend too much time defending their fiefdoms within it. Real fuel and energy competition would be good for them, and even more importantly it would be good for consumers.
11:27 Baucus (D-MT) jumps on the mention of tax reform by Tillerson, saying that we need to lower corporate rates and broaden the tax base. He asks if we should therefore remove tax breaks as part of comprehensive reform. Tillerson actually agrees with this.
11:21 Carper (D-DE) asks them about becoming energy companies not just oil companies. Now they get a chance to talk about some of what they're doing along those lines -- developing algae as a source of fuel, investing in natural gas, wind, solar, biofuels. However, what Carper or someone else should ask is -- what percentage of your budget goes to development of alternatives vs. stock buybacks and exploring and drilling for oil? The unfortunate answer is that it is a tiny percentage. We deserve better from these very large companies that are thriving and like to call themselves energy companies.
11:18 Sen. Carper (D-DE) reiterates what some others have asked -- given that we need to shift from a "culture of spendthrift to a culture of thrift," how do you justify your subsidies. Good question.
11:15 Sen. Nelson (D-FL) is zeroing in on BP, asking if they should really take taxpayer money given the disaster in the Gulf last year. McKay answers that they're just taking what the law allows. Nelson: Mr. Chairman, we should change the law.
11:10 Another contradiction from Odum of Shell -- the current U.S. tax structure puts us at a competitive advantage in the world. But the CEOs claimed earlier that they are currently taxed at a really high rate in the U.S. Hunh? These guys need to get their story straight.
11:07 Tillerson cries over the loss of subsidies in his answer, saying that taking them away will mean less production and therefore higher prices. There's a real contradiction in the statements from these guys -- we can't control a global oil price, but please please let us keep our subsidies otherwise prices will go up. Please.
11:04 Sen. Stabenow (D-MI) is up now, pointing out that subsidies are 1-2 percent of currently massive profits for the companies. That's tiny. What would it take for you to bring prices down, she asks?
11:02 Chevron's Watson plays the victim card. UNBELIEVABLE. We don't need sacrifice, our industry is suffering. Have these guys really considered their profit margins? Have they seen the deficit? THAT answer was unamerican.
11:00 Rockefeller (D-WV) asks a good question -- just how high does the price of oil have to go for you not to need handouts from taxpayers?
10:56 Sen. Rockefeller (D-WV) is now grilling the CEOs (we'll skip the irony of his namesake's role in launching this industry) for being so parochial and stubborn given their huge profits which Americans can't help but see as making oil subsidies completely indefensible.
10:53 Sen. Cardin (D-MD) is talking about a bill he's cosponsored with Sen. Lugar, a rare show of bipartisanship on energy, requiring greater transparency in the oil market via better reporting on contracts and deals around the world, which could help achieve baaaaadly-needed stability.
10:48 Sen. Cardin (D-MD, my Senator!) is up now, telling the simple truth -- we need to make tough choices with the budget, and oil companies need to help lower the deficit.
10:47 Menendez (D-NJ) brought up another angle that's often-overlooked. These companies aren't investing a lot in clean, renewable energy and instead make moves like buying back stock. "Oil above all" is their motto when making business decisions.
10:45 Sen. Menendez (D-NJ) is at bat now, going after Mulva (as Schumer did before) for a ConocoPhillips statement calling those targeting oil subsidies "UnAmerican." Again, Mulva won't apologize for this over-the-top statement.
10:40 Tillerson and Odum are trying to respond to Cantwell's line-of-question, I have to say that as well-compensated as these guys are (Tillerson raked in $29 million last year), I think they muddle through when talking about the futures market. Speculation plays a role in the wild price swings and deserves a closer look given how painful the swings have been.
10:35 Sen. Cantwell (D-WA), who has champtioned bold oil-savings bills in the past, is now addressing the Senators, asking about the futures market and its role in driving prices. As I've written, this deserves more scrutiny. It is not too far-fetched, after all, to think that Wall Street is joining Big Oil in messing with a market to the detriment of consumers...
10:30 Sen. Roberts (R-KS) is up, and focussing on refining profit margins, which are admittedly thinner as Exxon's Tillerson said. Exxon does quite a bit of refining, but they have a lot of other businesses; and overall, their profits in the first quarter were huge -- $11 billion.
10:28 Sen. Schumer (D-NY) is putting the CEOs on the spot, asking if they would choose cutting oil subsidies or cutting college student aid? The CEOs look distinctly uncomfortable, for the first time. Mulva of ConocoPhillips is in the hot seat, defending tax breaks at a time when they make absolutely no sense for this massively profitable industry.
10:24 Just for the record, this industry is not being held back domestically. Rig count is up, there are hundreds of thousands of producing wells, and a lot of work is being done on exploration and development. What these guys need to do is deliver real clean energy choices to us. Taxpayers deserve no less.
10:18 Sen. Snowe (R-ME) is up now, and she rightly pulls the lens back to ask why the nation has no real energy strategy. One note, though -- the Administration is working to boost fuel economy standards for cars and trucks. If they take our fleetwide efficiency to 60 miles-per-gallon (http://www.go60mpg.org), then we will take a huge step forward towards energy security. That's an awesome strategic move.
10:15 Sen. Wyden (D-OR) played a clip reminding everyone that President Bush rightly pointed out that at $55 (and certainly now at $100) companies don't need tax incentives to do their job. They are swimming in a sea of windfall profits thanks to a global oil-price elevator. They don't need these breaks, as even those from the oil patch will agree in moments of candor.
10:12 We, the taxpayers, fork over this money to Big Oil. They can't affect global oil prices (even if they tried, OPEC would trump them easily). Even if they could, though, the benefits would accrue to consumers around the world, not here. So we are being asked to pay not just to benefit these companies but to benefit consumers in other nations. This is a poor use of our hard-earned taxpayer dollars.
10:10 Hatch (R-UT) has evidently decided that he represents shareholders in companies, not taxpayers. Hmm...Could he be in the pocket of Big Oil?
10:08 Hatch (R-UT) is up now, asking if removing tax breaks will lower the cost of gasoline. This is a red herring. Having them in place certainly hasn't prevented pain at the pump. These guys have admitted they can't control a globally determined price. The tax breaks don't matter in the gas price equation.
10:05 Tillerson says the oil industry is in the "depletion business," a candid admission that oil is finite in the final analysis. We need clean, renewable energy choices, not dirty ones that are running out. These big companies should deliver that. Then they might deserve some of our hard-earned money. Not now, though.
10:04 For context, Taxpayers for Common Sense finds that "selected oil and gas subsidies" will add up to a cool $31.223 billion from 2011-2015 (http://www.greenscissors.com/GreenScissors2010.pdf).
10:00 Baucus (D-MT) is pointing out that the tax breaks don't affect the industry decisions about drilling given how large their after-tax profits are.
9:58 Baucus (D-MT) is talking about needing to reduce deficits. One thing he pointed out is that the global taxes for the companies are larger than the domestic ones, which makes seems to make a lie of the contention of the companies that they will be less able to compete internationally if the rate goes up here so it's closer to the global rate.
9:55 Tillerson admits that Big Oil can't control global oil prices, but then says that removing subsidies won't increase revenue (and therefore lower the deficit). The former is right, the latter is hot air.
9:53 Exxon's Tillerson, of the biggest oil company, is up at bat. First he claims that the industry shouldn't be held back from exploiting energy resources. To restate what I've said before, we have more producing wells than the rest of the world combined, we've invested unprecedented amounts in exploration and development and our rig count is higher than it's been in decades. We are producing plenty at home, and we just can't keep up with OPEC and growing demand in Asia, the biggest factors driving a global marketplace.
9:51 These guys are all playing the victim at a time when we need to do something about massive amounts of red ink coating the budget. How about a little patriotism by agreeing these tax breaks aren't entitlements?
9:50 Mulva: Repeal Big Oil's longstanding tax breaks and the world will end. Riiiight.
9:47 What's interesting about Mulva is that in the past he actually endorsed an increase in vehicle fuel economy standards, which the Obama Administration is actually achieving now. More efficiency so we buy less of their product -- that's the biggest way to tell Big Oil and OPEC what we think of them.
9:45 ConocoPhillips CEO Mulva (whose annual salary is a cool $50 million) is now defending oil subsidies, claiming they would damage our economy and energy security. So is he claiming we're doing pretty well on those two fronts with these subsidies in place? He's out of touch, if so. We're hurting.
9:42 McKay just talked up the company's commitment to efficiency and renewable energy. This claim by the industry drives me nuts. They are huge oil companies which dabble in clean alternatives. Call me a dreamer, but I imagine a day when we pull up to the gas pump or into our driveway and can fill our tank or charge our battery with a variety of energy sources. Thanks to these guys, and to bad policy, all we have instead is oil, oil, oil above all.
9:40 McKay claims the industry is committed to providing the U.S. with the energy it needs to grow. This is hard to believe given our growing reliance on imports and the fact that the global oil marketplace means what companies produce might be used in cars in Europe or Asia as well as here.
9:38 BP's McKay's speaking now, and says they're working to "meet commitments in the Gulf."
9:35 Odum talked about addressing "what we can control," and rightly so. Unfortunately for him, it underscores that the claim that we can control a globally determined oil price is a flat-out lie. Subsidizing this industry, therefore, doesn't benefit us at the pump. In fact, it's a "backdoor gas tax." Not only do we pay these guys at the gas station, we pay them with our taxes. It's outrageous.
9:34 Shell's Odum just opened up, reminding us all that they are a global corporation. It's worth asking if subsidies for them benefit them globally or domestically?
9:31 Watson of Chevron just talked about not subsidizing clean energy producers, which is actually what we should be doing until they reach takeoff and can compete. Oil benefits from a non-competitive fuels marketplace right now. Government policy should help level it.
9:30 Chevron CEO just talked up the oil industry's supposed tax level, at 40 percent. You'll hear this over and over. This is deceptive, however, since it includes all local and state taxes, not federal ones which are being debated right now. And remember to keep massive profits in mind along with tax percentages.
9:29 First up, Chevron's CEO.
9:28 CEOs of the big five "International Oil Companies," collectively known as Big Oil, just got introduced.
9:26 Someone just berated Hatch (R-UT) for talking too long. Sometimes a Senator will remind you why a Vice President early the 20th century (the VP serves as Senate President, so they should know) called the Senate the "Cave of Winds" due to bloviating by members of this exclusive club.
9:25 Hatch (R-UT) claims we can increase our market share in the global oil market. This is highly unlikely, since there's a consensus that production peaked in the 1970s while OPEC nations have a lot more drilling ahead of them.
9:23 The Ranking Member elicited laughs by putting up a picture of a dog and pony, implying the hearing is just a dog and pony show. Pretty funny for the animals at least, since they're not taxpayers forking over huge sums to Big Oil.
9:22 The Ranking Member also dubs revoking longstanding tax breaks for a mature, wildly profitable industry "tax increases" which is pure demagoguery. Even former Shell CEO John Hofmeister has said the industry doesn't need their currently favorable tax treatment when oil prices are as high as they are.
9:20 Ranking Member Hatch (R-UT) makes his opening statement by denigrating the Obama Administration and Democrats for actually wanting energy prices to be higher. His statement is noteworthy in that he doesn't talk about solutions, whereas the Chairman rightly described the need for investing scarce taxpayer dollars instead in clean energy sources.
9:15 Finance Committee Chairman Max Baucus (D-MT) gaveled the hearing open a few minutes ago. He set the stage well, beginning with a quote from George W. Bush about not needing tax breaks with $55 oil.
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