Senate panel questions oil execs

WASHINGTON -- With regular gasoline prices just shy of $4 a gallon nationwide, the Senate Finance Committee grilled senior executives of the five biggest oil companies yesterday about whether they really need tax incentives that some Democrats on the panel said the nation can no longer afford.

Citing the difficulty of closing the federal budget deficit, chairman Max Baucus (D-Mont.) said, "This is going to be incredibly difficult." He added, "Everyone's going to have to give in a little bit."

But the oil executives fought back against congressional efforts to eliminate tax benefits for the petroleum industry, asserting that if Congress wants to boost revenues and lower gasoline prices it should open up more federal land and waters for exploration to generate more production and tax and royalty payments.

"Tax increases on the oil and gas industry -- which will result if you change long-standing provisions in the U.S. tax code -- will hinder development of energy supplies needed to moderate rising energy prices," said Chevron chief executive John Watson.

"It will also mean fewer dollars to state and federal treasuries . . . and fewer jobs -- all at a time when our economic recovery remains fragile."

Later, Conoco Phillips chief executive James Mulva said, "We have shackles on us. Put us back to work."

But several lawmakers, including Sen. Olympia Snowe (R-Maine), questioned whether, given high crude oil prices, there is a level at which the companies have ample incentive to develop resources.

Exxon Mobil chief executive Rex Tillerson said that the cost of finding new oil was about $60 to $70 a barrel, an estimate far higher than what oil experts say companies pay to discover and develop new reserves in areas such as the Gulf of Mexico.

Tillerson cautioned that because of increasing costs, that figure would rise.

Lawmakers stressed that budget pressures necessitated a tough look at the companies' tax treatment.

President Barack Obama has proposed limiting or cutting provisions that he said would save about $40 billion over 10 years. They include a tax break shared by all manufacturers, the oil depletion allowance and other provisions for the expensing and depreciation of drilling costs.