The WALL STREET JOURNAL: Exxon,
ConocoPhillips, Shell To Testify at Senate Hearing: "The top executives
of Exxon Mobil Corp., ConocoPhillips and Royal Dutch Shell PLC will be
asked to justify record-high quarterly earnings when they testify at a
Senate hearing next week, industry sources said Tuesday.": Posted
Wednesday 2 November 2005
By KAREN MATUSIC and MAYA JACKSON RANDALL
DOW JONES NEWSWIRES
November 1, 2005 6:00 p.m.
WASHINGTON -- The top executives of Exxon Mobil Corp., ConocoPhillips and Royal Dutch Shell PLC will be asked to justify record-high quarterly earnings when they testify at a Senate hearing next week, industry sources said Tuesday.
The Nov. 9 hearing, a joint session of the Senate Energy and Resources Committee and the Commerce Committee hastily called last week by Senate Majority Leader Bill Frist comes as lawmakers threaten to slap the oil and gas industry with a windfall profit tax to help offset soaring fuel bills.
People familiar with the situation, who declined to be identified, said Exxon Chairman and Chief Executive Lee Raymond, ConocoPhillips CEO Jim Mulva, and John Hofmeister, president of Royal Dutch Shell PLC's U.S. unit, and maybe one another oil company executive are expected to testify at the hearing. Officials from various state attorney general offices will also testify next Wednesday, the sources said.
The companies and Senate staff members were unable to confirm the witness list by Tuesday afternoon.
It will be the first time senior oil executives appear on Capitol Hill this year to discuss high fuel prices. Industry views have been presented in recent hearings by umbrella groups such as the American Petroleum Institute (API) and the National Petrochemical and Refiners Association.
"When two Senate committees come together for such a prominent, high-profile hearing, they want to hear from the varsity, not the B Team," a Senate staff member said.
Sen. Pete Domenici (R., N.M.) head of the Senate Energy and Resources Committee, said Tuesday a windfall profit tax was under consideration but he wasn't convinced it was a good idea. "It has been tried before and had counterproductive effects," he said.
He said he wanted to hear from the oil companies why they weren't investing more to boost oil and gas supplies. "We haven't heard their explanation. We haven't heard what they're investing in," Mr. Domenici said.
Republicans Talk Tough Too
Rising energy costs led President Jimmy Carter to sign the Crude Oil Windfall Profit Tax Act in 1980 at a time when government price-controls were being phased out. The law, aimed at helping low-income families pay higher energy costs, was repealed in 1988 after crude prices had collapsed and the tax was no longer generating enough revenue.
While Democrats have been leading the recent calls for higher taxes on oil companies, Republicans began to talk tough last week. Frist, who called for the joint hearing on the same day Exxon became the first company in U.S. corporate history to earn nearly $10 billion in one quarter, demanded that senior oil executives testify.
Republican Senator Judd Gregg of New Hampshire, head of the Senate Budget Committee and self-described fiscal conservative, has called for a windfall profit tax to provide more funding for federal home heating assistance programs and to help cut the nation's budget deficit.
"Some might call this a novel approach for me, but I cannot sit back in good conscience while those in our society struggling to heat their homes are being left in the cold by oil companies," he said.
But the Senate's top tax writer, Finance Chairman Charles Grassley reacted skeptically to such a proposal. He urged fellow lawmakers to "embarrass the oil industry into contributing something" to a federal program to assist low-income households with their winter heating bills.
"I don't know where to end," Mr. Grassley told reporters Tuesday. "When you have excess profits on big oil, do you have excess profits on big Microsoft, and big Dell and all the others?"
Sen. Byron Dorgan (D., N.D.) and Sen. Christopher Dodd (D., Conn.) said they would press ahead with their plans to introduce legislation during the next two weeks that would levy a 50% windfall profit tax as long as crude oil prices remain above $40 a barrel, nearly $20 a barrel below current futures prices.
Mr. Dorgan said companies would be able to avoid the tax by sinking their profits into U.S. expansion projects. Energy Secretary Samuel Bodman said last week he was firmly against a windfall profits tax on the oil industry that he believed did not work in the 1980s.
A 1990 Congressional Research Service study concluded that the Carter-era windfall profit tax reduced U.S. domestic oil production by as much as 6% while oil imports rose by as much as 16%.
Feeling the Heat
At next week's hearing, the oil executives are expected to detail how their companies could do little to bring lasting price relief in a market held hostage by soaring global oil demand, an industry source said. They will also point out that two years of healthy profits came after a couple of decades of dismal returns.
They will also note that September's spike to record high crude and gasoline prices came after very tight global spare production and refining capacity was squeezed further after Hurricanes Katrina and Rita pounded the oil-rich U.S. Gulf coast.
"The hearing will be a good opportunity for the industry to educate a lot of people," the industry source said. "There was nothing we could do about the latest run-up in prices."
Several of the biggest companies have taken out full-page newspaper ads in recent weeks detailing investment plans and noting how hard they worked to restore hurricane-affected facilities in the Gulf.
It's unclear if the arguments will pass muster with U.S. politicians feeling the heat from angry constituents facing winter heating bills as much as 50% above year-ago levels. Many lawmakers have accused oil companies of purposely keeping U.S. refining capacity tight to increase profits.
--Rob Wells contributed to this article.
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