Representatives of the nation's oil producers pleaded with the House Ways and Means Committee yesterday not to remove their tax breaks from the Reagan administration's proposed tax legislation.
Officials of two of the industry's major trade associations -- the American Petroleum Institute and the Independent Petroleum Association of America -- and other organizations told the committee that oil tax preferences are needed to preserve U.S. energy independence and the domestic industry.
The oil and gas industries have fared better than many other industries in preserving their current tax breaks under the Reagan plan, which would overhaul the basic tax system.
A crucial tax benefit, a one-year write-off for such "intangible" drilling costs as labor, was restored from the Treasury's original proposal. And the deduction of a flat percentage of gross income, called depletion, was preserved for small wells rather than curtailed for all producers.
Producers testifying yesterday expressed opposition to the limitations on depletion, and said it would cut into oil production. But in response to a question from Rep. Donald J. Pease (D-Ohio), three of the six oil industry witnesses said they would support the Reagan plan as is, if pressed.
"I would vote for it as it stands today," said William R. Goff, chairman and president of Sabine Corp. of Dallas.
His view contrasted with testimony from representatives of such alternative energy sources as solar and wind power. They asked committee members yesterday to restore tax advantages the Reagan plan would eliminate.
The relatively few committee members present at the hearing appeared to be divided equally between those interested in cracking down on oil tax benefits and those who wanted to be generous. Their behavior gave little clue to whether the committee would cut back on oil tax breaks, as panel Chairman Dan Rostenkowski (D-Ill.) has suggested it might.
Rep. Pete Stark (D-Calif.), for example, read out a long list of oil firms that had paid little or no taxes in 1981, 1982 and 1983, and said the whole system would be fairer if Congress did away with everyone's tax preferences.
When API President Charles J. DiBona said the tax rate for the industry as a whole was higher than the national average rate paid by business, Stark replied: "As they say on the farm, beef steak and beef chips come from the same place, but there's a world of difference between them."
Rep. James Jones (D-Okla.), on the other hand, compared oil and gas tax preferences to generous pensions for police officers and fire fighters. Both are designed to meet a national need, he said.
The producers testified that removal of the deduction for intangible drilling costs -- a tax break that will cost the Treasury $5.3 billion in 1986 -- would cut oil and gas production by the equivalent of 1.6 million barrels a day by the 1990s. DiBona said that could help raise the share of imported oil in the United States from the current one-third to as high as 60 percent.
Jon Rex Jones of the IPAA showed committee members a chart indicating that the industry has invested more than its revenue every year since 1980, prompting members to ask how any producers could have survived with expenses higher than sales.
"You all are bankrupt!" responded a skeptical Rep. Sam Gibbons (D-Fla.). "You're operating a hobby." He wasn't soothed when Jones explained that the figures included investor funds from external sources.
"You all got a bunch of suckers on the hook, or what?" Gibbons asked. Jones agreed that many of those investors lost money.
"They caught on to that?" Gibbons asked.
"Many of them have, yes sir," Jones said.