Demanding ‘Big Oil’ pay its fair share

Forget, for the time being, US Sen. Robert Menendez (D-NJ) suggesting, at a May 11 Senate Finance Committee hearing, that a ConocoPhillips May 11 press release headline (“ConocoPhillips Highlights Solid Results and Raises Concerns Over Un-American Tax Proposals at Annual Meeting of Shareholders”) questioned his patriotism and required an apology. Ignore for the moment Sen. Ron Wyden’s (D-Ore.) continued skepticism when executives from US oil companies operating overseas said their firms are truthfully separating royalties from taxes paid to foreign governments in their US Internal Revenue Service filings.

It was John D. Rockefeller IV (D-W.Va.) who got to the heart of the matter when he said the 5 witnesses “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.”

Witnesses reiterated statistics showing that the oil and gas industry is the most heavily taxed US business, and studies showing that greater access to domestic oil and gas resources would generate more government revenue than increasing the industry’s taxes. None of this seemed to matter to the committee’s Democrats. They apparently were determined to get so-called Big Oil to pay a bigger share to help reduce the budget deficit.

With the exceptions of Louisiana’s Mary L. Landrieu and Alaska’s Mark Begich, Senate Democrats overall believe that requiring the nation’s 5 biggest oil companies to surrender tax deductions enjoyed by smaller producers and the rest of American business is a small price to pay because the majors made so much money in 2011’s first quarter. “We have a responsibility to review everything,” said Debbie Stabanow (Mich.). “Taxpayers expect us to ask tough questions. It’s very appropriate to look at whether a tax deduction which was enacted in 1916 is still appropriate. It’s not that we don’t want you to be successful. It just may not make sense to subsidize what you’re doing.”

Thomas R. Carper (Del.) said that congressional Democrats and Republicans have been conferring with the administration on ways to reduce the federal budget deficit. “We basically were told to look in every nook and cranny,” he said. “There’s a strong belief in this country that some of the tax deductions for your industry do not get us results we deserve. We’re going to vote on this bill sometime next week, but it should not be the end of the conversation. Later this year, we’re going to vote on reducing the deficit by some $4 trillion and everything will be on the table.”

ExxonMobil Corp. chief executive Rex W. Tillerson responded that the nation’s top multinational oil company supports comprehensive tax reform. “Everything should be on the table. If you’re going to repeal Section 199, repeal it for everyone,” he said. “The object is to create conditions for greater investment in this country. That’s where a lowering of general rates would help. The foreign tax code needs an overhaul as a well. The principals we live by are to make US investments attractive and don’t harm US operations overseas.”

“I don’t think the American people want shared sacrifice,” observed Chevron Corp. chief executive John W. Watson. “They want shared prosperity. Oilfield workers who can’t work today because their companies can’t receive drilling permits or access to more leases feel the pain.”

That idea did not sit well with Rockefeller. “I think the main reason you’re out of touch, particularly with respect to Americans as we try to balance the budget, is that you always prevail in the halls of Congress for a variety of reasons from your lobbyists to where you do business,” he said. “The size of the amount of money you make is hard for average people in West Virginia to understand. They’ve always in the process of losing. Everything is an uphill battle. My view is that I’m holding onto a huge boulder with 2 hands and trying to push it uphill. If I take one hand off, the boulder and I disappear into the gulch.

“I have never seen any industry so successful that it gives you a sense of assurance I don’t see from the steel or automobile executives I’ve seen sitting there at the witness table,” he continued. “I don’t think you have any reason to feel threatened because of how votes line up in this Congress. But I yearn for at least one of you to see what American people are facing in terms of losing health and unemployment insurance, and consider what you can do to address that.”

The Menendez bill’s chances of passing the full Senate when it comes to a vote aren’t good. The hearing about it revealed a deeply felt attitude among most Democrats on that side of the Capitol that the industry is a perfect tax increase target because they believe it isn’t paying its fair share now. It’s an attitude that could make matters difficult if this committee begins the serious deficit reduction discussions its chairman, Max Baucus (D-Mont.), wants later this year.

Improve federal oil spill research coordination, GAO urges

The federal Inter-Agency Coordinating Committee on Oil Pollution Research should establish a more systematic process to identify and consult with key non-federal stakeholders about oil pollution risks and research needs on an ongoing basis, the Government Accountability Office recommended.

The committee, which the 1990 Oil Pollution Act established, should also evaluate contributions from its completed research and provide an update of efforts to revise its plans in its 2012 biennial report to Congress, GAO said in a report it publicly released on Apr. 25.

It said that the committee’s member agencies, which include the US Bureau of Ocean Energy Management, Regulation, and Enforcement; the US Coast Guard; the US Environmental Protection Agency; the National Aeronautics and Space Administration; the US Navy; the National Oceanic and Atmospheric Administration; and the US Pipeline and Hazardous Materials Safety Administration, have spent $163 million on oil pollution research.

About $145 million of this amount came from the Oil Spill Liability Trust fund which OPA established and which was funded primarily from a tax collected on domestically produced and imported crude oil, the report said. The tax was 5¢/bbl when OPA became law, but expired in 1994. It was reinstated in 2005 and increased to 8¢/bbl.

GAO said that federal agencies have conducted at least 144 research oil pollution prevention and research projects since 2003, “but the inter-agency committee had a limited role in facilitating the coordination of agency efforts.” It established a joint research plan in 1997 which identified oil pollution risks and research priorities, but has not updated it in light of oil production and transportation changes, the report added.

It said that the committee also submitted biennial reports to Congress but did not identify member agencies’ progress addressing gaps which the 1997 research plan identified. “Until recently, it also had not revisited the plan, as the National Research Council recommended,” GAO said. The committee’s efforts to foster communication and coordinate its members’ research, and to reach out to the oil and gas industry, states’ organizations, and other stakeholders, also was limited until recently, according to the report.

In a March 4 response to an early draft of the report, the US Department of Homeland Security, which oversees the Coast Guard, said that it generally concurred with the recommendations and is addressing them. It noted that DHS’s fiscal 2012 budget request includes a full-time position as executive director of the inter-agency oil pollution research coordinating committee, and the position is a key step in the Coast Guard’s efforts to revitalize the program.