Major producers Thursday defended themselves against Senate Democrats’ claims that they don’t need the billions of dollars of federal tax breaks that they currently receive (see Daily GPI, May 12; May 4).
Appearing before the Senate Finance Committee, executives for ExxonMobil, BP America, Chevron, Shell Oil and ConocoPhillips said that stripping them of the tax breaks would do nothing to bring down high oil prices, but it would limit their ability to invest in future production and thus would reduce supplies.
Furthermore they pointed out that some of the tax subsidies that the Senate is seeking to eliminate are not specific to the oil and gas industry. Major oil and gas companies said they do not get “special subsidies,” as lawmakers contend.
ExxonMobil CEO Rex Tillerson cited the Section 199 manufacturing tax deduction. Oil and gas companies are limited to a 6% deduction, while other companies enjoy a 9% deduction.
Moreover the foreign tax credit, which is meant to prevent double taxation and protect U.S. competitiveness abroad, is not specific to oil and gas, Tillerson said.
By seeking to end these tax breaks for oil and gas, he accused Congress of “arbitrarily punishing” the major producers. Tillerson believes that “access, not taxes” should be the focus of Congress. Legislation to strip major producers of as much as $21 billion in oil and gas tax breaks could come up for a vote in the Senate next week.
There’s a “great deal of misinformation about our tax liabilities…Unfortunately it’s being used to justify further increases,” ConocoPhillips CEO James Mulva said.
He noted that ConocoPhillips, with a tax rate of 46%, is the most heavily taxed company in the U.S. Comparatively, the 20 largest companies by market value had an effective tax rate of 27%, he said.
BP America CEO H. Lamar McKay said he supports incentives for oil and gas. Without them, there would be less investment, less supply and higher prices, he noted.
“A stable and competitive tax framework is critical to the United States remaining attractive in…global demand for capital investment,” McKay said. “The currently contemplated changes to the tax rules would limit the resources [that] companies like BP have to invest” in conventional and emerging energy technologies, he noted.
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