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Oil execs defend profits at Senate

By Deepa Babington and Chris Baltimore
Reuters
Wednesday, November 9, 2005; 5:42 PM

WASHINGTON (Reuters) - Under fire for high fuel prices, five major oil companies on Wednesday warned the U.S. Senate against levying a windfall profits tax and showed little interest in donating money to help poor Americans pay winter heating bills.

The companies, which earned a collective $30 billion in the third quarter, also surprised lawmakers at a Senate hearing by saying they didn't need the billions of dollars in tax breaks and energy incentives recently approved by Congress.

It was unclear if the hearing would lead to any new energy laws or simply allow senators to express indignation at high prices.

About 40 senators fired questions at the top executives of Exxon Mobil Corp. <XOM.N>, Chevron Corp. <CVX.N>, ConocoPhillips <COP.N> and the U.S. units of BP Plc <BP.L> and Royal Dutch Shell Plc. <RDSa.L>

Much of the discussion revolved around basic energy issues such as how oil prices are set, as some of the senators sought to identify if Big Oil was the villain behind the record gasoline price of $3.07 a gallon in September.

At the end of the day, Republican Pete Domenici of New Mexico, who co-chaired the hearing, said the question of oil price profiteering remained but that there was no evidence yet that the oil companies had been unfair to consumers.

Democrats and Republicans have floated plans for a windfall profit tax and a profiteering ban, but neither has wide backing.

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The oil executives dismissed the impact of $14.5 billion in tax breaks and incentives in the energy law Republicans pushed through Congress last summer. Since then, lawmakers have been searching for ways to cut as much as $50 billion from federal spending to curb the budget deficit.

"When you add it all up, that energy legislation is zero on how it affects Exxon Mobil," said Lee Raymond, the company's chief executive, who is about to retire. Exxon had a record profit of $9.9 billion on $100 billion revenue in the third quarter.

Chevron chief executive David O'Reilly said that instead of incentives, refiners need environmental regulations relaxed.

Democrat Ron Wyden said he would try to rescind some tax breaks in the energy law.

All five executives warned that proposals for a windfall profit tax could stymie investment and push prices higher.

"History teaches us that punitive measures, hastily crafted in reaction to short-term market fluctuations, will likely have unintended negative consequences," Raymond said.

U.S. crude soared to a record $70.85 a barrel after Hurricane Katrina lashed Louisiana in August, and is now under $60 a barrel. The retail gasoline price is $2.38 a gallon.

But more energy sticker shock is on the way for consumers. Natural gas heating costs in the U.S. Midwest this winter will soar nearly 50 percent, while heating oil in the Northeast will rise 25 percent, according to government forecasts.

One executive rejected a Republican request that companies donate 10 percent of profits to a $2.2 billion federal fund that helps poor Americans pay winter heating costs.

"We think it is a bad precedent to have private industry support a federally funded program," ConocoPhillips CEO James Mulva said.

The companies also unanimously urged lawmakers to relax environmental regulations and lift restrictions on drilling in areas now off-limits, like an Alaskan wildlife reserve.

Republican Ted Stevens of Alaska, head of the Senate Commerce Committee and a longtime ally of oil interests, kept a tight rein on the hearing. He stopped Democrats from asking executives about their annual pay, and refused to have the five men take an oath to tell the truth in their testimony.

That avoided an embarrassing photo akin to when tobacco executives raised their right hands at a 1994 congressional hearing and swore cigarettes were not addictive.

Otherwise, civility was the norm in the packed hearing room. A group of about 20 activists sat quietly wearing tee-shirts that said "Exxpose Exxon," one of whom tried handing Raymond a leaflet on his way out. Raymond walked on.

Later, Raymond met privately with House Speaker Dennis Hastert, who said he urged Exxon to expand its U.S. refining and oil production capacity.

The energy industry is still recovering from hurricanes Katrina and Rita. Full oil and natural gas output from the Gulf of Mexico will not be restored until June.

The Senate panel also heard that the Federal Trade Commission sent dozens of subpoenas to oil companies in its probe of fuel prices, which should be finished in the spring. Companies subpoenaed include the five at Wednesday's hearing.

(Additional reporting by Tom Doggett in Washington and Ben Berkowitz in New York)

© 2005 Reuters