Conoco CEO to speak at US Senate hearing, says higher oil taxes would discourage investment
ConocoPhillips CEO Jim Mulva will appear on Thursday at a Senate Finance Committee hearing in Washington, D.C., where he says he will outline the negative effects of proposed tax policy targeting major energy companies.
The bill, proposed on Tuesday by a trio of Democratic US Senate members, would repeal tax breaks for the five largest oil companies.
The bill’s sponsors say it would save US taxpayers above $2 billion/year, potentially easing budget deficits.
Mulva, however, said he expects to describe to committee members how misinformation about the industry’s tax liabilities is being used to justify proposed tax increases.
“Our industry already has the highest effective tax rate in the US,” said Mulva. “Increasing these taxes would cost jobs and raise gasoline and other consumer prices, while actually unintentionally reducing the government’s tax revenue by discouraging investment by the industry’s largest and most financially capable companies.”
Mulva added that the proposal would impede the industry’s ability to reinvest - not only in the oil and natural gas needed to power the economy today, but also in new energy technologies and resources that will be essential in the future.
“Our industry and company are already taxed heavily compared to other industries in the US,” Mulva said. “For example, ConocoPhillips’ effective global income tax rate from 2006 through 2010 was 46%. If you look at non-financial companies in the Fortune 500, the 20 largest by market value had an effective tax rate of 27%.”
That tax rate already limits the company’s ability to invest in finding and recovering energy reserves, he said.
In 2010, the company said its payout was equal to its income. After paying $8.3 billion in income taxes - as well as $3.1 billion in other non-income taxes - ConocoPhillips earned $11.4 billion in income.
Proposals to repeal the Section 199 domestic manufacturing deduction for the five largest oil companies would discriminatorily deny them a tax deduction available to every other manufacturing industry, as well as to large oil companies outside the top five, Mulva argued.
This tax deduction was enacted by Congress in 2004 to stimulate job growth in the production and manufacturing sector, which in turn, encouraged more domestic energy production, he said.
“The oil and natural gas industry supports 9.1mn jobs in the US, a fact that is too often overlooked,” said Mulva.
“Also, taxes are included in gasoline prices. At a time when everyone is concerned over the cost of gasoline, Congress shouldn’t do anything that could actually worsen the situation,” he added.
President Barack Obama has repeatedly placed blame on leading oil firms for rising retail gasoline costs.
In addition to Mulva, ExxonMobil CEO Rex Tillerson and Chevron CEO John Watson are also expected to testify at Thursday’s hearing.
The panel will also hear testimony from Shell’s US operations chief Marvin Odum as well as H. Lamar McKay, a US executive for BP.
The legislation is scheduled for a vote in the Senate next week.
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