Senators Turn Up Heat on Oil Executives
Oil company executives faced tough questions Wednesday about their industry’s record profits during a Senate hearing that gave lawmakers a chance to vent about high energy costs.
Sen. Larry E. Craig (R-Idaho), an industry ally, told the executives that the No. 1 question asked at his recent town-hall meetings was “about you and your profitability. And I must tell you, it’s not terribly fun defending you.”
But at a joint hearing of two Senate committees, the executives of five major oil companies made no apologies for their profits -- more than $30 billion in the third quarter of this year.
Sparks flew from the beginning, when Democrats demanded that the executives testify under oath. Sen. Ted Stevens (R-Alaska), chairman of the Commerce, Science and Transportation Committee, denied the appeal, saying that forcing the witnesses to be sworn in was unfair, as they appeared voluntarily, and unnecessary.
“There is nothing in the standing rules of our committee or the Senate which requires witnesses to be sworn,” he said. “These witnesses ... are aware that making false statements and testimony is a violation of federal law whether or not an oath has been administered.”
The political potency of the energy-price issue was evident as about a third of the Senate showed up at the televised session -- also sponsored by the Senate Energy and Natural Resources Committee -- to question the executives of ExxonMobil Corp., Chevron Corp., ConocoPhillips, BP America Inc. and Shell Oil Co.
That hearing was not the only place where energy prices were discussed Wednesday. House Speaker J. Dennis Hastert (R-Ill.) met with ExxonMobil’s chief executive, and White House spokesman Scott McClellan said President Bush wanted oil companies to be “good corporate citizens” by investing in construction of refineries and doing more to assist low-income energy users.
During their 3 1/2 hours before senators, the executives said their companies’ earnings should be measured over time and against their large investments in energy projects.
“Petroleum company earnings go up and down,” said Lee R. Raymond, chairman and chief executive of ExxonMobil, whose $9.9-billion third-quarter profit was up 75% from a year ago.
He said the company poured money into projects to increase fuel supplies “when earnings are high as well as when they are low.”
Shell President John Hofmeister added: “True, the total dollar numbers are large, but so are the billions of dollars that petroleum companies have invested to supply energy to U.S. consumers.”
Their explanations did not ease the political anxiety of lawmakers in both parties over high prices. Several vowed to press ahead with legislation, such as a windfall-profits tax and a prohibition on price-gouging, but those measures are seen as having little chance of passing a GOP-controlled Congress.
Lawmakers from both parties -- some of whom waited hours to ask questions in their allotted five minutes -- expressed frustration with executives’ answers. When Sen. Maria Cantwell (D-Wash.) told the executives she wanted “just a ‘yes’ or ‘no’ answer” to whether their companies exported fuel before Hurricane Katrina, Raymond responded, “Well, senator, there are no easy ‘yes’ or ‘no’ answers in this business.”
Some tensions were among senators. When Sen. Barbara Boxer (D-Calif.), displeased that Stevens refused to swear in the witnesses, sought to submit a 1970s picture of then-Sen. Henry “Scoop” Jackson (D-Wash.) swearing in oil company executives during hearings, Stevens snapped: “We don’t put photographs in the record.”
When Boxer held up a chart listing the executives’ compensation as she attempted to ask about their salaries, Stevens interrupted her, saying: “We’re permitted to have charts to show information that pertains to our issue. This chart is really publicity.”
But Boxer still was able to scold the executives: “Working people struggle with high gas prices -- and your sacrifice, gentlemen, appears to be nothing.”
Although pump prices have eased from a high of more than $3 a gallon for unleaded regular after Hurricane Katrina damaged Gulf Coast energy facilities, both Republican and Democratic lawmakers are still getting an earful from constituents. In addition, they are bracing for consumer anger over expected increases in the cost of home heating.
“People were shocked with the hit in the price of gas at the pump, but I think it’s fair to say that this winter there will be an equal, if not greater, shock when people look at their natural gas heating bills,” said Sen. Lisa Murkowski (R-Alaska).
In his written testimony, ConocoPhillips Chief Executive James J. Mulva acknowledged “public distrust” of the industry, but added that consumers were “mistaking the size of our earnings for a windfall, not realizing the enormous levels of investment required to achieve those earnings and bring new energy supplies to the market.”
The CEOs opposed a proposal pushed mostly by Democrats to impose a windfall-profits tax on the oil industry, saying it would discourage investment to increase energy supplies.
“History teaches us that punitive measures hastily crafted in reaction to short-term market fluctuations will likely have unintended negative consequences,” Raymond said.
Agreeing, Sen. John E. Sununu (R-N.H.) said: “As much as we all want to be seen as doing something here in Washington about high gas prices ... we shouldn’t undertake legislation that’s been proven in the past to increase demand and increase dependence on foreign imports of oil.”
The executives also rejected a call by Sen. Charles E. Grassley (R-Iowa) for oil companies to contribute 10% of their profits to a federal program subsidizing home heating for low-income households.
Mulva called it “a bad precedent to have private industry support a federally funded program.”
Senate Majority Leader Bill Frist (R-Tenn.), who requested the hearing, issued a statement afterward complaining that the executives did not “adequately answer the question of whether the sky-high gas prices we saw earlier this fall were entirely justified, and whether their companies’ profit margins are appropriate given the hardships energy consumers are facing and will continue to face this winter.”
At the end of the day, Sen. Craig lamented that, despite the lengthy testimony, “gas pricing is so hard to understand -- and even harder to explain -- that five CEOs could not explain to me why gas in Idaho is more expensive than in Washington, D.C.”