Oil Executives, Defending Tax Breaks, Say They’d Cede Them if Everyone Did

At a three-hour Senate Finance Committee hearing that was largely political theater interrupted occasionally by a serious tax policy discussion, the oil industry executives said their current tax breaks were not subsidies but legitimate tax deductions, shared in some cases with other industries.

Rex W. Tillerson, chief executive of Exxon Mobil, said that the provisions, such as a tax deduction for certain types of manufacturing, were not “special incentives, preferences or subsidies for oil and gas, but rather standard deductions applied across all businesses in the United States.”

He said that eliminating the provision just for the oil industry would be “misinformed and discriminatory.”

Under questioning from Senator Max Baucus, Democrat of Montana, the panel’s chairman, Mr. Tillerson said that he would support repeal of the manufacturing tax credit and other tax incentives, as long as all businesses were treated the same.

“Repeal it for everybody, gone,” he said. “Everything for everybody everywhere ought to be on the table.”

At issue was a Democratic-sponsored bill to rescind roughly $2 billion of the $4 billion in tax incentives the oil industry now enjoys annually, with the money dedicated to deficit reduction. Mr. Tillerson shared the witness stand with top executives of the four other biggest multinational oil companies, John S. Watson of Chevron; Marvin E. Odum of the United States division of Shell; H. Lamar McKay of BP America; and James J. Mulva of ConocoPhillips.

Collectively, the five companies reported more than $35 billion in first-quarter profits, and are on a pace to set record profits for the year. Their profits, their tax treatment and gasoline that in many areas is over $4 a gallon have made them juicy targets for Democrats seeking political points and painless revenue.

The bill, which is expected to come to a vote on the Senate floor next week, is unlikely to command a filibuster-proof majority in the Senate. Even if it passes, it has little chance in the Republican-dominated House, which seems more inclined to provide the oil companies more access to public lands and waters than to clamp down on their tax incentives.

The House passed the third of three Republican pro-drilling bills on Thursday. The measure would force the Interior Department to open large tracts of the Atlantic, Pacific and Arctic coasts to oil exploration and to set annual production goals. The administration and most Democrats opposed it, saying that the Deepwater Horizon accident a year ago demonstrated the dangers of offshore operations.

The Senate tax bill’s chief sponsor, Senator Robert Menendez of New Jersey, demanded that Mr. Mulva apologize for a ConocoPhillips press release on Wednesday that called the tax proposal “un-American.”

“I think that’s beyond the pale,” Mr. Menendez said. “I was hoping you would come here and apologize for that.”

“Nothing was intended personally,” Mr. Mulva said.

“So the bottom line is you’re unwilling to apologize,” Mr. Menendez said. “So I’ll continue to take offense.”

Most Republicans, along with Democratic senators from energy-producing states, appear sure to oppose the plan. One oil-state Democrat, Mary L. Landrieu of Louisiana, said this week that oil and gas subsidies accounted for less than 13 percent of all United States energy subsidies.

The ranking Republican on the finance committee, Senator Orrin Hatch of Utah, suggested that Democrats were playing a cynical game, seeking to blame oil companies while, he asserted, intending to raise gasoline prices to force reduced consumption.

“So while the American people ask Congress to do something about high gas prices,” he said, “the response of Democrats is to rail against oil executives, to mask the fact that their policy is actually to make the price at the pump more painful.”

He called the hearing a “dog and pony show” and displayed a blown-up picture of a dog riding a pony, to underscore his argument that the hearing was just a chance for Democrats to score political points, without doing anything about high gas prices or a sensible energy policy.

Mr. Odum of Shell said in an interview after the hearing that he was disappointed that the discussion focused on the relatively small value of the oil industry’s tax breaks and not on the broader question of how to address the deficit and expand domestic production of oil and gas.

“The piece I take the most exception to, once you get past some of the theater aspects of the setting, is that it’s such a narrow view,” he said. “If the purpose is to address the deficit and the long-term health of the economy, the bigger picture is more important. And that is to produce more oil and gas and get the revenue streams and jobs from that.”

Brian Knowlton contributed reporting.

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