tv Today in Washington CSPAN May 13, 2011 2:00am-6:00am EDT
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you could do whatever you can do, you know. nobody would tell you -- a state of law sometimes is applied in a selective manner. if you are not coopetive enough to be involved in some corrupt practices, you know. other than that, we have a state of a jungle, you know, where, like what folks say, the state of nature, where all against all. this is what has been taking place at least in the last ten years in the country, yoknow. therefore those four challenges if we do not attd to them immediately i ink libya will be in a very, very serious position, you know, as it might be characterized as a failure state. with this uprising coming to existence, there could be a solution, because this is a new generation, where the libyans, the diaspora, some of the qualified libyans inside, we
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have the qualified libyan resources to dit. we have the financial resources. we don't need me assistance financial from anybody. all we need is the real political will to do it and the right vision to accomplish it. >> mr. prime minister, youe been incredibly generous with your time, and we can only wish that your vision of libya is one that is fulfilled and perhaps even before 2025. ain, i need to ask everyone to stay in their seats while we move the prime minister out, but please, from your seats, join me thanking the prime minister of the libyan opposition. [ applause ] >> tomorrow, the head of the u.s. energy information administration will talk about gas prices. also a look at federal spending
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with house budget committee buys chairman scott garrett. "washington journal" at 7:30 a.m. on c-span. this june on "in doubt." the limits of international law. your questions for eric posner. his books include "the perils of socialism." >> you're watching c-span, bringing a politics and public affairs and every morning. it is "washington journal." withyoung it wit politics.
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on saturdays, "the communicators". it can watch our programming any time that c-span.org and it is searchable. c-span, washington your way. >> senior british military chiefs are questioned about afghanistan by the house of commons defense committee. the u.k. has 10,000 troops deployed. they discuss u.s.-british military relations on the ground and the death of osama bin laden. this is an hour and a half.
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the purpose is to do two things. what happened in 2006 and when we went into helmand and what happened subsequently. also to look at the current situation in afghanistan. the issue of the current situation is something i would like to get on to in order to finish the committee meeting by 12 if that is acceptable to the committee and the witnesses.
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that will explain why we tried to rush things and get to those timings. would you be kind enough to introduce your team and at some stage, we need to get through the positions you occupy in 2006 as well. >> thank you and a pleasure to be here. we're grateful for the committee on behalf of the defense general. my team are generals [unintelligible] and general peter wall.
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what help we said know what we did? nato officer.s a commander of the arc. tony blair said the arc would take responsibility for excising command-and-control in sanctions silent in december and january 2005. i was in that capacity through 2006 and 2007. >> i was in iraq as a senior british military representative and i did that job from an early -- early october through late march 2006. i had been the assistant chief
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and aid to start deputy. i was aware of the material relating to the genesis of the commitment in 2006 and in the first three months, i was in iraq and came back in the last couple days, i assume the appointment at north would and i was chief joint operations there for three years. at that time, i was involved with the early days of the deployment in helmand.
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i was responsible for the running of day-to-day operations and anywhere else we have to go. i did that job until february 2007 which in the context of the questions, i was directly involved in the planning for the deployment to a afghanistan after the key strategic decisions have been taken. and i was responsible for the north end of operations in helmand through 2006. >> thank you. i think you may all have had the opportunity to see the website, that was given by former witnesses, including general frye. if there is anything you wish to
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correct from your perspective in that evidence, please take that opportunity to do so. do you think it was wise to push for the deployment into helmand in 2006 and what was your role in that deployment at the decision to go into helmand fax >> i was by then in my nato role. just to remind you, the decision was on the back of a much bigger and more important decision for nato to go to the south and east. britain, having been supportive of that decision in principle, which i thought was right
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because the campaign needed generating up. someone had to decide which province, each of the four lead nations in the said it would take, the canadiens, the british, the dutch, and to a degree, [unintelligible] with american support. that led to the u.k. going into helmand. someone had to do helmand. we were the most capable of the four nations. i thought there was a strong case for going into kandahar but we ended up in helmand for reasons i suspect -- [unintelligible] >> there is three parts to the question period was the right to go? was the right to go to hell, and, and was the right to go then?
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in terms of the right to go, the genesis of which is within unscr and within the discussion in a note to galvanize the nature of the international community and on their behalf. and to bring about strategic change in terms of it being -- for which the delivery of good government and governments was essential. in terms of going, the genesis of that from an international political level was right. tahoma and, peter will have some
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views on this as well. i think it was inevitable that the u.k. as a leading player within nato had to play a leading part in what was assessed to be one of the most challenging part of the country and it needed to be similar in the south and in the context of the various decision making during 2005, it was clear that the canadiens were keen to take on kandahar. helmand was the next most appropriate place to go. helmand by dint of the political -- who did what in the south, helmand was the right place. was it the right time? that is the only thing over which i might hesitate. in terms of strategic decision making, relating to committing after that time, from my
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knowledge in 2005, was based on a realistic but optimistic view of what the level of our commitment in iraq was -- would be by then. the level of reduction and commitment that has been forecast and hoped for in 2005 had not materialized in 2006. i sensed that was a disability given the political and international level of decision. >> i am not sure -- i detected from february 2005 at which point we were in cobblkabul.
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the south needed to be nipped in the bud. there was strong momentum coming out of london to get engaged in this in a constructive way. this had been identified as the level of commitment to galvanize a result. the was the -- the level of confidence was in demand which implies a national commitment. at the regional level, where there was alive presence prior to our planning for this, the
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onus was on us to work with the other nations. to start putting together that. as to why helmand, the canadiens were there but their ambition was to play a dominant role. because its importance in the region. it would not be putting words in their mouth to say that they pitch their ambition to be a key player there. helmand was the last place you look at. it was consistent with the fact that the u.k. had a lead in afghanistan.
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year, there was american enthusiasm but it led as an agricultural area. they have done some military operations and they had a couple battle groups in the south. that used to make occasional forays into parts of helmand and kandahar. we spent our time trying to anticipate what sort of force we would need to propagate governments from the center of homeland and the most populated areas. this was a key question in our mind. >> in large part, the americans
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have 100 people wandering around in the area. you said it was a fairly benign area. how many -- i remember visiting before they deployed and discussing with them what they thought there were going to encounter. discussing with them in a theater with they actually experienced. clearly, their intelligence had increased because they come up against the tribes and so on. we did not seem to have any intelligence of any quality about what they were about to do. in terms of this intelligence. >> what we found when we had officers on the ground was different from what we had
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anticipated and been hoping for. we have to stop -- there might be situations in which they have to fight to settle down. the idea that they would set up camp was not what we were anticipating. we had an adverse reaction. in terms of what was going on in the preceding months to a tejanos. the intelligence situation, we did a number of things over the proceedings six months. we set up a preliminary operations team which was a
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plan for the -- there is a plan there building on the experiences of the government in iraq which was not that -- and there is a chance to get this right. other things -- it was our understanding of the situation, our ability to get this down to tribal level. this was on the tip of our tongues. we were about to [unintelligible] we were stretching every sinew to get the picture as clear as possible.
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we were actively engaged including with a counterparts. we were in consultation with academics and we had an ex- mujahideen on staff. there was a history of shedding light on what might happen in these situations. i cannot complain about the quality of people we had working for us. we tried to get the best assessment of what might lead us when we hit the ground. >> if i may just say, i was doing parallel work. i remember a number of meetings and it is not my job to defend
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politicians and their statements. because we -- there was a failure of intelligence, there were efforts to try to get it right. he did give the task force helicopters, artillery, all of that because we had to be prepared for the unexpected. another of the problem is we could not know enough about the northern part of helmand until we got there. this was no way one could do it. it was located in enemy territory. it was in the area and there was a picture that was positive. the problem was when we went into the north and arguably, -- no one would know that. although that is always going to be a lapses in intelligence, you cannot know everything you wish to know.
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processes were in place to deliver the best to could. you cannot get on the ground -- and get to know who was what. the picture will start to develop and that is historically the case in every conflict. despite our high-tech ability, that was the picture. >> this was not a failure intelligence -- of intelligence but it clearly was. we had anticipated taliban attempts, we underestimated was their capacity. >> i would like to hear what the general has to say because you took a particular position. the question about whether or not there was a possibility of delayed consequence or knowledge is something you could address as well. >> i would not say delay.
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my point on that is if you were able to wind back the strategic clock on decision making. but there have been a ability to de-conflict. -- our commitment to save as a higher level or longer than was anticipated in the genesis of the planning. i think my point about a couple things i wanted to add, was this a failure of intelligence? intelligence is not a perfect science. people think if you apply, the future can be defined with certainty. that is not the case. i arrived in the middle of this and reflecting on it, there were a number of incipient factors that emerged which can reflect
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on to better explain why the hornets' nest was as it was. the first i would say is a factor of poppy eradication at the time of the employment. it was in the minds of some and within the narrative of the taliban this idea that these forces that are arriving are coming here to eradicate the poppy and take away your living. that worked against us in terms of strategic narrative. i think that linked to that as we found in retrospect, this is the natural start of the fighting season if the fight is to be here. something like 200,000 casual laborers migrate north from pakistan to conduct the harvest in helmand alone. very happy to stay on as -- for
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hire if there is a local travel fight that they can earn some money in. a couple of -- stay on and do have 4000 fighters. the poppy eradication gave the macaws. the other thing is as part of the preparation for our arrival, the americans were conducting a series of operations which culminated in operation mountain thrust. it was part of the desire to create an easy entry for us. i think it is possible that this actually because it was a connecticut operation and there was much to and fro about the degree that we could moderate this, it also acted as whipping up the environment.
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the last is that for reasons -- this was sort of [unintelligible] led or whatever. a character that will be known to many of you was removed as the governor and the new governor put in. the net effect from this which i do not think was sorted was to completely destabilized the trouble balance and the balance of power within northern helmand. all i am doing is making the point. lots of records intelligence was carried out. that led to a fairly -- that was able to do with the environment.
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the american connecticut operations which were approved to our deployment and this of setting of the trial balance, that is a more comprehensive explanation of why the situation on the ground was not that what intelligence had forecast. answert is a fascinating unse which is what i have not heard before. we have got to move on rapidly. >> it was not there at that time. it was part of the changing scene 12 months later. >> you have seen the evidence that we seek from butler.
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he did not take the decisions alone. i wonder if you could explain to us how the decision was made, who was involved, and why the decision was made then? why at that point? >> i could start. i was not responsible at the time for the south. i took on the 31st of july. i was monitoring what was happening and disgusted with general aye eikenberry -- eikenberry.an ver i did not think it was fair to describe the change of mission. it was a change of tactics and although i know from a number of books on the subject, i personally was supposed to what
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became known as the concept. i was forgiving of the need to respond to some very strong political pressure, largely from the governor but it was instigated. this is natural but president karzai because he felt at the very moment that nato was on the brink of taking over responsibility, things were beginning to slip away from him on the back of a resurgent taliban in a number of places that included no. helmand. the british were just another nation that had responsibility, came under a lot of pressure to respond to that. the political requirement to be seen to be doing more about what was happening.
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it ties in with the point that on the back of the replacement of the new governor, there were a lot of internal political pressures stirred up by sma, who said, i was running a good show. you have to show progress. it was put in a poor position. it was not the tactical thing we had a great but it was the eventual time to bring it forward. they implemented -- it became [unintelligible] >> this was not a decision that was made by brigadier butler, the tactical commander loan. he did it in consolidation
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anticipating this would be the case with articulating that this would be a tactically undesirable. it was the sort of thing where political pressure was starting to build. something that -- the departments that put down in places [unintelligible] and it happened i was on a program visit to the area and at the point where this crisis started to unfold, the timing was driven because the taliban have the district under pressure. the governor's perception, his lack of tribal influence for the reason that neck has talked about. he was willing to pull this off
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with behind-the-scenes politicking and there was pressure from the axis. if the government flag have fallen in any of these and the taliban flag had replaced it, and it was stuff like that. it was the matter of the puck -- flagpoles. the efforts in terms of its recognition of afghan political motivation from the provincial level and district level all the way up to the national level was going to be in political jeopardy. his credibility would be in question. just at the time that the was takingrs where i leadership. any suggestion this was a win by
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brigadier butler is a falsehood. everybody else as far as i know was aware of this and they were closely involved. the military tactical risks were considered and it was accepted this could be done at measured risk and we would then start to have real logistics' dresses if it got done -- extended beyond a shorter time to assure security. these district centers to keep the governor in power. there is a question we ought to throw into the mix here. most of the questioning i had on this and the bbc are making a documentary about it at the moment. they come from the position of what happened if we had stuck to plan a and taken account of the
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situation which is not normally a recognized military approach. we would have had a political failure. we would have had a significant credibility problem in terms of the uk initiative in the south and the integration of the missions. we would still have had a hell of a fight with the taliban. it would have happened closer in the sense of the population rather than in the remote districts. we would have bigger reasons have we not done this even though the outcome was unattractive. >> i think this was not a change of mission, but it was a change of tactical design and delivering that mission. everything peter said about the not discretionary nature in support of that mission of having to support the local
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government and governments of afghanistan in particular and the governor, i also take peter's view to have done otherwise could have undermined the operation from the outset. if i could add any more value on, this is the business to what degree of that -- visibility was there and decision making in town? as chief of operations, one of the responsibilities is to get the best possible understanding of what is happening to decision makers so we do not go on strategic divergence without political authority to do that. i would not bore you endlessly but i dug out the best record of this. probably the chief of staff minutes of may and early june.
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i think it is clear from the record and of the chief of staff and borne out in the minutes from may 24 that color briefed the taves about the house concept. this is may 24. the investments were 27 and 26. even though there have been a presence in the buildup time. the committee meeting is followed immediately by a ministerial briefing and other stayed on to that briefing and briefed the proposed concept. for the next two weeks, i will not be exhaustive. before meeting on may 31, i was able to report in that the concept was going down well. it had a good local reaction to
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it. i think at that time, raised the first concern the chiefs had previously persuaded this -- themselves this would be neutral. if this is going to be sustained over time, it will put additional pressure on our logistics' and the sustainability of manpower and that would -- was reinforced one week later. there was a helicopter to mention. this was proposed to do it for one month. that initial political concern that the governorship would be undermined in what was referred to as the battle of the flag poles. that would have been the end of the mission. and quickly, just to say as the minutes recall, there is this a
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sensible conversation that the nature of the concept is going to be a resource intensive. and of greater concern to the tactical commander and to me. we were having conversations -- it was going to come to a situation where too great a percentage of a -- the force was fixed in place rather than being able to maneuver. this narrative of dialogue was the one that played out during the summer. i say that to go back to that, the fact there would be a requirement for a significant deployment. to the north of helmand to support the government.
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i say this to dismiss any idea that this was happening in some black box of military decision making that was not completely open to the tapes of staff and to ministers at the time. i have to say my memories of lord brown is he was -- i have not seen his transcript and he was fully supportive about the judgments and the tactical -- of the tactical commander. he could see it through the optics of political necessity to do this. the realities of the resource intensity of this quickly becoming known. in very much everybody understanding what was going on. not some compartmentalized military adventure. >> at the moment, at the
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outset, for one month, to see whether or not this new disposition would work, almost as a fire from which we could draw back. there was not really dialogue as to whether or not staying there made sense. it needed to be in the guts of the thing at the time. it was precarious and strategically not vital. you will remember as the year when dawn it was decided and at the time when 16th brigade were leaving and it was important to create the circumstances under which we could get out. it was too dangerous to hold. it was not of strategic benefit
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to us. arranged with a plan, the raising of local police under came out.afisaf after that month, there was a constant decision. where should we come out of, where do we need to stay? it was determined there was a need to stay for a longer time. there was probably never a specific date when the overall decision to adopt was made but you moved to a lay down which better balanced resources and static security of the ability to maneuver. i would say i think we
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collectively raised a sigh of relief when they were settled and brought additional equipment and it was a far more balanced way down. we had successfully got through that initial deployment without it undermining the local governorship of afghanistan. >> the simple answer of course was the problems that he did not go way. he had not managed in that time that was bought in the early weeks to secure his political influence in the governments of those districts and others were actively orchestrating against him. that is why it carried on. >> i've got to move on if we're getting to the current operations. >> in terms -- whether that was
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everything, which ministers were present who could -- they said it was done retrospectively. >> is that right? >> there is no minutes or record by can interrogate to assemble the detail of the time. lord brown was at the briefing that followed. at that time, there have been some investment of military presence in many of those but it might only have been temporary for a particular operation. the formal adoption of a platoon house concept was consequent on the briefing. it was not a decision brief message.
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i am certain this was the 20th but that is not to sit there had not been running battles with people going in and coming out. the emergence of the idea of the platoon house concept predated that briefing. >> ok. thank you. if the secretary of state had not been around, the next minister would have been. >> thank you. >> what assessment was made by the -- of troop levels and if there was sufficient investment of new resources as required in july? we have had evidence before that there was a significant strain leading up to this point anyway about the insufficiency
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of resources to deal with the task in helmand. perhaps you could clarify what changed at this point and whether it was sufficient? >> it was clear that if there was a requirement for the theater and the commanders could justify it, he would do his best to deliver. there was a requirement for a more apt -- uplift. it was an uplift out. that was sending out more spares and all that. that was by the end of june. the other things i would recall, many of them might surprise you. the most important resource concern of the time was the protection of kandahar airfield and the concern of the loss of the strategic team aircraft.
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that led to the deployment of a protective squadron. there was this, what could have hinged this campaign if one of the strategic aid team was shot down? there was the realization that 15% of the force came out six weeks in. there was the [unintelligible] and an engineer surge in order to increase the pace of the build up. those weren't the only resource -- it was not a matter of we need 10 more. there were high in the global concerns about what resources were needed. throughout the last five years, there was constant debate that matches the dynamics of the theater and the demands of the
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resources. those were the only ones as i recall. >> just to take the point about capability. the initial assessment at the time when the whole thing was meant to go about, the u.s. would come in with all sorts of helicopter support and promises and shows where to carry out this deployment. it needed changing dramatically. where was the ability to meet those needs to give you that supply and the capability? >> we went in with certain agreements. to get to establish. the full operating capability of the deploying task force was not until the first of july. we were deploying --
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>> the enemy had made the difference. >> there was the desired order of arrival. we changed it around to get more and that's out there quicker because we were employed as we were deploying. there would run out to the point of operational capability when our people have deployed so that was the end of the bridging thing. we did incremental uplifts. the next major change was on the change out of 16 brigade and three brigades. they came with a larger force, with a greater amount of protected mobile equipment. vikings vehicle. >> is there anything you would like to add? >> no.
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it was not easy for us to find a theater ready to uplift instantaneously. i cannot remember the airlift situation. therefore, we were -- in terms of the neighbors which were the critical drivers here, this was going to be incremental. it will be incremental so it was not about -- it was about more food supply and logistics. >> last week, we were told that the forces were still forming. what is your assessment of the implications of these very restricted needs at a time of
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increased need? we can take the general point that there were infinite demands but what we're trying to get to is assessment of this point. what is this man? >> we need to go back to the constraint we were put under in terms of the original force. this was only going to be what we called a small scale deployment. with a sort of theater platform. it was new. we turned to a force of 1100 and we heard about the costs which was the first three years. we were planning for logger but that was the [unintelligible] we did not have more staff standing by. whether it was an activity or
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combat units. the thought was a live within that period the wider point is pertinent to the discussion. which is that we're attempting to design our aspirations to the future in fairly tight bundles which do not lend themselves to be brilliant and situations that are unavoidable. >> looking azide do from a distance, it was clear that the british were getting into a different -- a difficult situation. having been involved with trying to generate and do that, it is that very understanding that led to the original cautious plan
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which was we go into the air and consolidate their and only cautiously start to push out. in a war and you understand this, it is a bummer. i am afraid we had to respond to the reality of the growth of the developing situation. i was slightly critical. i was full of admiration of the nato commander for the way were supported and he knew the problems but the military had [unintelligible] that is all they 16th brigade consisted of. they've behaved magnificently to change. we were -- we needed time to recover.
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over two years and five years, things were better. that is the way that wars tend to develop and we were not any better than our predecessors. >> i think some of his analysis is compelling. he had a concentration against dispersals thing. we could be having a conversation that is more difficult had our soldiers have not stepped up to the plate and delivered in a situation that turned out to the strategically different from that which was anticipated. >> we had not analyzed what would have happened if we acted. >> even if we have adapted with our complete support, that is back to the plan.
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they delivered in tough circumstances. >> there were the strategic priorities. helmand was coping. we tend to focus on this as if it were a drama. nothing that is happening is that at all the strategic threat to the mission. his concerns were more what was going on in the canadian area. going back to these minutes which i have fallen in love with, it is amazing to recognize how much afghanistan was the second fiddle to what was going on in iraq. there was bombing, a civil war was on everyone's lips and there
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was the preparedness of the operation. this was what drips from the minutes of the time. that is without departing and i had forgotten that in the middle of all this. this was all within the -- the idea that there was this intensity of concern probably -- it did not feel like that at the time. >> thank you. >> you have -- wit would be nice to have had the same thing. there is little or no record of many of the things that were
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referred to but there appears to be minutes of which is rather strange. >> you realize quickly that things needed to be changed. if you look at that time frame. you have the deployment in july. was it enough? you were knowledgeable about the situation and the realization it was far worse and it was going to be a long job. did it happen quickly enough? could you have gone troops there sooner? >> we were thinking about this at the time. i suspect there were limits to the ways with which we could build up a force. we carried on building it over the winter of the following year. we investigated because of this business of being fixed, we
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contributed from the u.k. a reserve battle group. suggesting we were not bold enough. >> i cannot remember the precise details. >> what part did you three have by and setting the numbers that were going to be deployed? >> we were going to put forward propositions which would have taken of view. >> i was a commander. i have been having conversations with the general where it was patiently explain to me that because of the demands, it was not possible but
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there were on the job. i could not have had a more receptive audience. we got them in. every nation had been caught by surprise by the developing and i often pondered whether those people who took the decision to deploy nato and to 2004 would have done if they knew what they were confronting in 2006. i suspect there would have had to. everyone was suffering. this takes time to generate. the scrutiny and your scrutiny to make sure we put troops into theater today, it is impossible to shock troops in a hurry at a problem because we have the duty to make sure it is done as well
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as it can be. it was not for what drove past during may. i am grateful to all three of you for this. i am grateful to everybody who took part in this inquiry into the 2006 aspect. we're not trying to say it was shortfall for was your fault. what we're trying to do is work out how we as a nation try to improve on the way we do things.
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they've affected the industry and prices at the pump. we'll ask the same question our 43rd president requested -- asked. is it wise to continue g breaks given to the largest oil companies every year? gas prices are nearly $4 a gallon today and experts anticipate they'll remain that way for the remainder of the season. that means gas prices are up more than $1 a gallon compared to last summer. in fact, families will pay an average of about $825 more for s this year than last year. in the rural areas like montana where people drive farther, the increase is more like $1,200 for household. the five largest oil companies collect lively earned more than $50 billion in the first quarter
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of 2011 alone. physicists should, of course, make a profit. that's the american way. drives our economy. but to -- do these very profitable companies actually need these terps subsidies? energy incentives should help us build the energy future, not pad oil company proffers. they want us to develop energy sources that won't be defleeted like wind and sun. we can't reduce using fassel fuels overnight. they're here for a long time. we must work with them and get them as clean as possible as we convert to renewables. but vestments in clean energy will move us away from oil. we have to scrutinize every dollar in energy subsidize we
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spend. the $2.1 billion every year we spend on subsidies on the largest oil and gas companie are not prove moving us closer to our energy goals. everyone today finds their budgets are tight. families, governments, households. congress is also debating the west -- best way to address our deficits and debt. some are proposing cting medicare for seniors. others slashing pell grants for students. i think all americans agree as we tighten our belts we all must sacrifice together equally, shared. so we have to fake a hard look at every subsidy and every spending program to be sure we're using our dollars wisely. in 2004, congress created the domestic manufacturer deduction, often referred to as section 199. this deduction is designed to still -- stimulate manufacturing
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in america. i remember it back wheit was enacted to replace the fisk e.t.i. it was basically not used by e-- the majors so the 199 was essentially a gift given to the majors, according to my recollection because they were not using the so-called fisk e.t.i. so 199 was essentially a gift. each company here today has claimed this deduction but what have taxpayers received in return? these tax breaks prove to be more valuable their medicare or pell grants. these tax breaks have not lowered prices. when these were created, retail gas prices averaged $1. 8 per gallon. by 2008 prices had rison to $3 .20 per gallon and last week they approached $4.
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these tax breaks have not moved us toward energy independence. according to a study in 2009, in all the subsidies for the oil and gas industry were eliminated, domestic production would fall by less than one-half of 1%. that's the entire energy. today we're only talking about the five largest. they have the most resources and are the -- excuse me. the big five have the most resources and are the least dependent on government subsidies. so the effect on domestic production for these cpanies would be less. some argue that eliminating tax breaks for these companies will raise prices at the pump or force layoffs. the oil and gas industry has
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launched argument against this. but a 2007 analysis found that repealing oil and gas breaks would not raise energy prices for consumers. would not. why? very simple. oil prices are set on a world market. and the u.s. share of production is only about 10%. that makes it difficult, if not impossible, to pass on the costs of losing these subsidies to consumers. given profts of $35 billion in just the first quarter alone, it's hard to find evidence that repealing these subsidies would cut domestic production or cause layoffs. after all, based on first quarter profits, these tax breaks represent less than 2% of what these companies are on pace to make this year aneven without these tax breaks, these companies would be clearly highly profitable. the chart behind me to my right
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lists the financial documents the companies here today have filed with the securities and exchange commiion. basically documents first timed with the s.e.c. according to those documents, the average cost to produce a barrel of oil was about $11 in 2010. and the average price these companies received for a barrel of oil was about $72. i don't say this is exact but it's roughly what the s.e.c. documents show. today oil prices are a lot higher. 40% higher, which would increase these large profit margins much furthethan shown on this cht. so it is hard to manage that -- imagine that companies faced with these opportunities would cut production. now, some might argue that these subsidies or record profits create much-needed jobs. but those same documents, public
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documents filed at the scurts and exchange commission, show that nearly 60% of these companies' 2010 profits went to stock buybacks and to dividends, not to job creation. we can put this money to better use and we should. we should use it to reduce our deficit instead of putting the burden on seniors and our children's future. it's choic everybody. it's shared choices, america working together and looki at thfacts and seeing the degree to which limiting these subsidies would in fact be a fairer way for us to start to reduce our defit because reducing these subsidies, evidence shows will have virtually no effect on jobs or loss of jobs in this country. for reasons i've indicated. so i urge us to do what's right, what's right for our -- wise for
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our couny. this is one place to examine, look at it, see what the facts are and there are a lot of other areas we can look at. today we can only address one subject at a time and the subject today is the one at hand. senator hatch? >> well, thank y, mr. chairman. everybody is angry about high gas prices and i can tell you that i'm angry about it. the press keeps telling us that we need america to come together and put aside partisanship. nothing makes for a kumbaya ment like high gas prices. republicans don'like paying high gas prices anymo than democrats do. with one voist america is telling to us do something about it. unfortunately for some, the political philosophy of rahm emanuel is too hard toaste, never let a crisis go to waste. they decide to exploitigh gas
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prices for political gain. thiss a double gain for those politicians. on the one hand they are able to score cheap political points. onhe other hand all their fury signifies nothing. it is designed to re-- take away from the simple fact that the democrats have no energy polls -- policy whatsoever. let me take that back. actually, they do. their energy policy is to increase the cost of energy. you heard that right. this is the president's energy secretary steven khiu. "somehow we have to figure out how to boost the price of gasoline to the levels in europe." so the response of democrats is to rail against oil executives to mask the ct that their policy is actually to make the
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price at the pump more painful. for all of their talk about the shrinking middle class and the income and equality. high gas prices don't hit warren buffet and warren beate the hardest. they have to hit moms because they have children. when al gore has to pay a little more to gas up the provide jet to fly to france, he doesn't feel any pain. but when my con stitch quenlts -- stitch -- constituents see gas go higr, they have to make real choices. david letterman captured this current situation brilliant live. gas prices, aren't they crazy? it's so expensive. the reds are carpooling in fm new jersey. i'd expect my friend from new jersey to change the joke and say that the rats arrived in the opposite direction.
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we don't have as many rats in my home state of utah, but like states in new jersey and new york, utahans are plenty angry about high gas price, near $4 per gallon. this is very discouraging becae we are sll recovering from one of the worst recessions our country has ever faced and all the gas prices has done is put the brakes on an already fragile economy. i hear from small businesses that they're trying to make a profit and possibly hire more workers. but no, they have to make room for energy expenses. i hear from those who are still looking -- looking for employment. what the people of utah and this country need is a forward thinking energy policy that will address rising gas prices that is a lead weight around the neck of the complifment i'm not here to defend any particular industry.
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i'm one of the leading pro opponents of promoting alternative fuels. i might add i passed legislation that does do that. let's not gloss over the plan that is being offered here. the plan that is being offered here is to raise taxes. americans e rightly upset about the cost of gasoline and the solution being offered here? let's raise some tax. lawyers would call this a non secretary tur. every y, americans would call it beside the point. it's about as relevant as a person walking into the doctor's office complaining of chest pain and having the doctor offer to reup holeser the couch. this demands an energy policy, but all this hearing is about is providing a justification for tax increases. i sh i could say i was
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surprised no. matter what the question is it seems that for the president and some of my colleagues, the answer is always raise taxes. government spends too much. raise some taxes. health care too expensive. raise some taxes. gas prices too expensive, i've got it, let's raise some taxes. i would be doing a grave disservice to my constituents if i was to ignore the grave con consequences on these gas prices. at a time when we are still recovering from an historic economic collapse. the proposals that will be discussed today are completely divorced from those pressing needs. the reasoning put forth for repealing these tax provisions, rising gas prices and reporting high first quarter profits would set a bad precedent for future
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tax increases. are we to raise taxes anytime a company sees an increase in profit due to high demand? what if an increase in coffee results in starbucks recording record profits? what if the hollywood studios hit a few home runs with new films and record profits result? i'm not going to hold my breath waiting for democrats to call george clooney up here to justify his income. i do not believe we want to go down the dangerous road of deterring u.s. businesses of becoming too profitable. i'm afraid we're going to see you try to score political points today. i have a chart depting what i believe this hearing will turn into. there you go. that's a really nice picture. >> bhost the horse and who's the
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dog? >> i think we both know. i know who the horse's ass is, i'll put it that way. i shouldn't have said that. elaine is going to give me heck when i get home. it's perfectly appropriate to examine the purpose, design, and intent and effectiveness of tax incentives that promote the production of oil and gas. let's have that detective. in004 congress passed the american jobs creation act. the centerpiece was the domestic manufacturing deduction. this provision was designed to strengthen the domestic mastering sector. its a deduction for manufacturing everything from coffee to appliances to the domestic production of oil and gas. the amount of the deduction is
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tied to wages paid to the american workers. the intent was not to incentive manufacturing and productionut to manufacture and produce in the united states rather than overseas. congress passed this provision with the expectation that it would provide economic growth and job creation here in the united states. this provision is not just tied to oil and gas and to the oil and gas industry but applies t income derived from all manufacturing within the united states. maybe we should have a meaningful conversation about whether this provision is good tax policy, given that it impacts industries far outside of the oil and gas industry, it is a conversation more appropriately suited to a debate over tax reform but i'm not going to hold my breath waiting for this adult discussion of tax policy. i know the distinguished chairman has been trying to do a ries of hearings on tax policy
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and i am personally very appreciative of that and i applaud his leadership. instead i expect some good political theater. the liberal people at nbc certainly had the talking points yesterday afternoon and are ready to make middle hay. many will point to a comment made by a former c.e.o., that oil and gas companies do not need these tax provisions. that c.e.o. might be right. but let's be clear, they would be less likely to drill in the united states without these tax incentives. we have to ask whether we want to help increase the market share for the u.s. or decrease that market share and put ourselves at the mercy of foreign importers? i'm not going to wait for the nbc lineup to stand on their
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hats on an oil rig and ask about the potential loss of blue collar american jobs. we have a great number of resources that be be used in the united states. i plawed president obama's recent pledge to reduce foreign oil imports by a third by 20 20. however, i was taken aback that he told brazil that we want to be their best customers if they incrsed their oil production. so it's ok for other cpanies to boost their economy with oil production but wrong for us to do it at home. to be honest, i do not know what the president and his cabinet is for energy security. and i don't expect to get an answer today. the american people are upset at high gas prizes and are demanding solutions. the president has no solutions. his policies would increase the cost of domestic production and
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harm our economy. so faced with the uncomfortable fact that the buck stops at the oval office and the president's only solution to high energy prices is to double down on them, liberals hope to distract the american people from their failure to develop a co-heernlt energy strategy. we currently depend on oil for our energy needs because it is abundant and it's dependable. demand is and will remain high for the next decade and certainly beyond that. there's a reason why florida's demand for petroleum based transportation fue is among the highest in the united states. there's a reason why new jersey and maryland consume more gaspar capita than most states. and we have the resources to make that demand -- >> senator hatchare you almost through? you've been talking for a long
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time and we don't have our testimony yet. >> no, i'm not through yet. but i'm almost through. just recently geologists have discovered in the western part of north dakota and parts of montana a 20,000 square mile sea of oil that could hold the largest accumulation of oil identified in america since 1968. they have dubbed it the kuwait on the prairie. we also have a great deal of oil in the rockies, on public lands and off our coast but the president has done everything in his power to shut down federal leases in these areas. maybe it's just the people working for him, i don't know. we all know politics is thick in the air here. our dog and pony will feel very much at home. many democratic snarpts have admitted that it's good politics to take on oil companies when gas prices are hh. we all knowo everyone is angry
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about high pump prices but if we want to do something about it, three questions come to mind and i'll pursue these with the witnesses. will the policies proposeded by the president and democratic leadership cse pump prices to dr? second question, if pump prices do not drop then what will the policies proposed by the president and the democratic little do? one possibility might be that these policies will cause the u.s. to become more dependent on imported oil. the third we request -- question, with respect to tax incentives available for all u.s. manufacturers, is it wise, and this is an important question -- is it wise to single out one industry and treat it differently from others? i'll put a finer pnt on the question. is it wise to conduct business tax reform on a selective and punitive basis? it's a legitimate question and we ought to answer it. let's send the pony back to the
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stable. that's what we ought to do. let's send the dog back to the kennel. let's get back to forming the tax code to support economic growth. so far in this congress we've been making progress in making the tax code more first quarter, simpler and fairer and i know that the chairman is dediced to that as am i. and i hope the chairman will continue. thank you. >> thanks so much. senator. i'd like to introduce the panel before us. our first witnesses is drmplets john watson, chairman and c.e.o. of chevron. second, mr. marvin odum. u.s. president of shell oil company. third, mr. lamar mckay, chairman and president of b.p. america. fourth, mr. james mulva, the chairman and c.e.o. of conocophillips, and finally, rex tillerson, chairman and c.e.o. of exxon mobil. mr. watson, why don't you begin?
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you probably know our customary procedure here is haveour statements included in the record. if you could summarize, around five minutes. thank you very much. mr. watson? >> mr. chairman, ranking member hatch and -- half and members of the committee. i am john watson, chairman and chief executive offir of chevron corporation. fortunately, our nation is endowed with adunn ant supplies of energy including oil and national gas. each time we come to capitol hill we advocate for measures that would better helm develop our oil supplies. it's one of the most effective ways to counter rising energy prices and stimulate economic growth. tax increases on the oil and gas industry, which will result if you change long-standing privesings in the tax code, will
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hinder energy supplies and it will also mean fewer dollars to state and federal treasuries and fewer jobs all at a time when our economic recovery remains fragile. because my time is limited i'll make three points. first, the oil and gas business pays its fair share of taxes. despite the current debate, few disease be -- businesses pay more in taxing than oil and gas companies. the wordwide effective tax rate for our industry in 2010 was 45%. that's higher than the u.s. masters at 26 .5%. between 2008 and 2009, our industry paid or accrued almost $158 in taxes including $9 in federal income taxes. totals nearly $ 6 miion a day. changing a tax prives outside
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the context of a brooder cooperate tax reform would restrain domesticing develop and reduce tax revenues it -- at a time when we are needed the most. raising royalty fees will increase the cost of doing business in places like the gulf of mexico and impede development of these resources just when we're getting back to work. second, long-standing provisions in the tax code parallel tax preement treatment of other industries. for all u.s. businesses a basic tax principle is that there are figured off -- after costs. the oil and gas industry's expenses are similar to the research expenses developed by pharmaceutical and technology firms.
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they allow them to recover the costs of risky designs necessary for their business. some thee long-standing provisions in the tax code. make it ply to other sections of the u.s. enomy, including the manufacturers' deduction. we're concerned about e proposal to curb foreign tax credits for duel taxpayers. without these credits, we would pay tax twice on income generated overseas. this would make us less competitive internationally and cost u.s. jobs that support our overseas operations. my third point is that there should be equitable treatment for all forms of energy and all energy producers, large and small. i am an advocateor developing all forms of energy and using it more wisely but it's wo wrong -- wrong to increase taxes to
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subsidize other forms of energy. this is also likely to have serious consequences for production, jobs, and revenue. singling out companies because of their jobs is anti-competitive and discriminatory. after all, our five companies are providing the technical, opating and managerial spers that is allowing the global energy industry to operate. the most sensible path is simple -- don't punish our industry for doing its job well. allow us to develop ouration's vast energy resourc and strengthen, don't weaken, our abilities to compete against large national oil companies, who are major players in the u.s. and global energy oil markets. responsible development of our resource sources, will add more high-paying jobs, provide billions of new tax revenues,
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and reduce our depend ens on foreign energy supplies. if our nation's concern is keeping nevts here at home we ask for here is what we look for anywhere we nevis. conditions that are not punitive and discriminatory. mr. chairman, i'm proud to lead a 132-year-old american company, i'm proud of the vital role we play in our economy and i'm proud ofous -- us being able to make significant contributions to our community. thank you. >> thank you. you're next. >> thank you. i'm marvin odum. president of shell oil company. shell is a global energy company with more than 90,000 employees in 90 countries. approximately 19,000 of those are here in the u.s. working to discover, produce, market, and
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deliver through consumers today's energy and tomorrow's energy technology. thank you for the opportunity to speak to you today. i'd like to address right up front the issue that's on many americans' minds, the rising cost of energy, particularly the cost of gasoline. cause fuels are refined from crude oil, the biggest impact is the price of crude oil. everything from weather to politics and the global economy determines the price of oil and the fuels made from it. weak economic conditions in 2008 and ninth -- 2009 lowered demand, whichelped push prices down. now with world economic recovery on the way, demand is on the rise, sending prices upwards. in addition, because oil is sold in u.s. dollars throhout much of the world, when the dollar becomes weaker, it takes more dollars to buy the same amount of oil. oil is a global commodity. so while we can't predict or control the price at the pump,
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we do know that we can increase the stability of our energy future through a combination of efficiency gains and increased supply. and the surest way to address a challenge of a this agony tude is to focus on what we can control, using what we know to save guard against what we don't. without question, our govement is facing significant channels right now, particularly in terms of economy and -- economic and energy security. but when you face a deficit, choices are usually straightforward. get more or use less and often it's a combination of both that achieves the best results and there are choices on how to get more. it can be temperaturing to assume there's something to gain by taking more from a few. however, one must balance the implication of increased industry cost on both supply and the cost of fuel. the opportunity in front of us is to put polies in place that allow the energy industry to
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become an economic growth i think -- engine for america. developing our own resources, we would see tens of thousands of new well-paying jobs and many billio of dollars from revue for local, state, and federal governments. last year, shell reported global earnings of $1. billion. we also nevised some $29 billion, mostly in new products to bring energy supply to the consumer. we spent more than $40 billion to run our existing energies worldwide. last year shell deferred some $700 million in capital expenditures. we expect to lose an additional 50,000 barrel ive lenlts a day as a result of that. it represents lost gasoline production just to shell that couch powered on average
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6333,000 cars and light trucks every day since january 1. here in the u.s. at the invitation of the federal government, we have invested more than $3.5 billion since 2005 to develop -- develop energy resources in alaska. six years later we've been presented from drilling a single exploration well due to e government's interference. during that time we have drilled more than 400 exploration wells worldwide. nevts in our industry carry huge amounts of capital and risk. policymakers must considerhis when thinking about the competitiveness of the u.s. the present recently acknowledged that reduci certain imports was a national policy imperative. we agree.
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the u.s. is resource rich in any ways, especially with oil and gas. the bottom line is if we don't develop our own energy sources we will have to accept the cost, both financial and geopolitical of bringing it into this country from places that can be less secure and stable. in closing, shell is grateful for the widespread recognition in congress of theaunting energy challenge facing this nation. although come -- some of our opinions differ, we stand ready to work with you on developing a more secure, affordable and efficient energy supply for this nation. thank you. >> thank you very much. mr. mckay? >> thank you, mr. chair. ranking member half and committee -- members of the committee, good morning. i'm pleased to address energy
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incentives today. last marc month marked the one-year anniversary since the b.p. accident and b.p. continues to work very hard to compete our commitment in thgulf. i'd like to provide a little bit of context on b.p.'s nevts in the u.s. on traditional and renewal industry. we are committed to providing the u.s. with energy it needs to grow in the coming decades. doing so and a spot -- doing so in a responsible manner. largesthe nation's energy investors. over the five years ending in 2009, we have invested more than $37 billion in development of u.s. energy supply. we continue to invest in natural gas production from the rocky mountain west and our existing
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shale gas regions. we have significant oil production in alaska. we have made significant investments in our refineries in the u.s., including major capital projects at our key midwestern refineries. we also invest actively in renewable energy. during 2009, we invested nearly a billion dollars in alternative energy. these investments include the operation of wind farms in 10 states, development of the first commercial scale biofuels facility in florida, and work on advanced biofuels molecule with dupont. we have our solar business, which has been in operation over
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35 years. bp supports a comprehensive energy policy that includes all forms of energy, including oil, natural gas, coal, nucar, biofuels, wind, and solar, and encourages conservation. even with major improvements in energy efficiency, and the rapid growth of bfuels 20 yearsrom now, the united states will still depend onil, nural gas, and coal to meet more than three-quarters of its energy needs. on the supply side, we support properly scaled transitional incentives for alternative energy, but raising taxes on one form of energy to encourage production of another will reduce industry's ability to keep up the growing u.s. energy demand. the result could be less
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investment, less production, a tighter energy markets, and over time, at higher prices for consumers. instead, our nation should be encouraging production of all forms of energy. on the demand side, energy policies should encourage conservation and helped drive energy efficiency. the energy challenges facing the u.s. are enormous. the impact of high energy prices on the overall economy and the american people are very real. we cannot change the international crude oil market, which tries those prices -- drives those prices. but we can work with the congress and the administration to move toward greater energy security and lower carbon energy future. congress establishes the rules regarding energy and tax policy. companies take those rules into account in making their
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investment decisions. because of the long-term nature of the significant capital investments that are required to develop and produce energy, a stable and competitive tax framework is critical to the united states, remainin attractive in the global demand for capital investment. the rrently contemplated changes to the tax rules would let the resources companies like bpave to invest. not only in conventional energy production, but also a new and emerging technologies. you're serious about building a sustainabl profitable, alternative business capable of delivering clean and a portable power. at my company stands ready to work with you and others. thank you. >> thank you very much.
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>> good morning. my hope today is to bring clarity to this vital debate on tax policy regarding major oil companies. there is a great deal of misinformation about our tax liabilities. unfortunately, it has been used to justify further increases. my objective is to convey first the realities of our current tax burden and the negative impacts of new proposals. there would be in? to our company, our industry, american consumers, u.s. job creation, and national energy security. let's take a look at what we already pay. it shows the effect a worldwide tax res.
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there are a lot of familiar names on this chart. the group paid 27% for the years 2006 to 2010. look at those three in red. >> i cannot read some of those. >> walmart, berkshire hathaway, apple, intel, microsoft. >> and it is done at the bottom? >> general electric, the horizon, coca-cola. >> at the top, conocophillips, followed by the two international american companies. the three major u.s. oil companies already pay the highest tax rate in the top 20. keep in mind that this is after taking the allowable tax
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deductions and credits. what does this mean in our dollars? for our company, we earned $11.4 billion last year. we paid $8.3 billion in iome taxes as well as $3.1 billion and other taxes. car total worldwide taxes paid to declare income. any fair minded person would likely agree that we pay our full share. companies like ours carry the flag of u.s. competitiveness into the battle of global business. every day we fight for access and opportunities around the world. are rivals are typically nationally ownedompanies from other countries and they literally dwarfs us in size. some are dozens of times bigger than we are and they enjoy support from their government. despite these compelling numbers and the need to maintain a competitive u.s. oil industry,
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some would have us pay even more. one proposal would only impact the three major oil companies that already carry the heaviest burdens. further restrict the foreign tax credits that are available to us, seriously undermine our ability to conduct our business internationally. but we decide how much to bid for foreign energy opportunities, we have to include taxes and the total cost. overseas companies with lower tax obligation outbid us and when the opportunities. unfortunately, this does impact u.s. jobs. we operate worldwide and we have 29,000 employees and 20,000 here at home and go some of them work to support what we do internationally around the world. read this in our foreign tax credits will have a cascading effect on our business.
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we will this project and opportunities to foreign competitors. our u.s. job creation, investors would suffer. as profitability declined, it would reduce our ability to invest in domestic energy. a ultimately, we could even see more energy and development conductedy foreign competitors. it would spend -- it would send dollars back to their home countries. we hear a lot about the so- called tax subsidies down coat this calls for another reality check. the major companies do not get subsidies. some deductions and credits available to the industry are not allowed to the three major companies. the ones we are allowed mirror those available to all u.s. companies. even in these cases, the law
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limits how much we can benefit. that hardly sounds like a special industry subsidies. compress often speak -- congress often speak of enhancing u.s. competitiveness. but this would be very counterproductive. it would penalize u.s. workers and the american public that invest in our shares, and they would on the well-being of companies that must carry our country into the energy future. that ctainly cannot be your intent. i urge you to objectively and passionately considered the facts and reject these unfair and unwarranted taxroposals. thank you. >> thank you. >> i appreciate the opportunity to address the topic of today's hearings. all of us here today recognized
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the strain of high gasoline prices imposed on many americans. during difficult economic times. we owe it to our customers and to your constituents to address the topic of energy prices and taxes and an open, honest, and factual way. unfortunately, the tax changes under consideration the target of the five u.s. companies represented here today failed to honor those goals. it is not simply that they are misinformed and discriminatory, there counterproductive. but undermining u.s. competitiveness, they would discourage future investment in energy projects in the united states and therefore undercut job creation and economic growth. because they would hinder investment in new energy supplies, they did nothing to help reduce proxy's. there is a more effective way to take steps. unfortunately, it is a way that
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congress and the administration has rejected great if wwere deveped -- has rejected it. it would put downward pressure on energy prices and increased revenue for government budgets. working together, industry and government can achieve our shared goals. i would like to offer several important facts on the specific tax proposals under currently being advocated by some in washington. it is important to make clear that tax provision such as the section 199 domestic production activity are not special incentives. they are standard deductions applied across all businesses in the united states. section 199 applies to all u.s. domestic producers and manufacturers, from newspaper publishers to corn farmers, to movie producers and even coffee roasters. all can claim this deduction.
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by any reasonable definition, it is not an oil and gas industry incentives. we are limited to only a 6% deduction, while other all u.s. manufacturers are allowed in 9% deduction. didn't ignite a select few companies within the oil and gas industry the standard deduction is tantamount to job discrimination. why should an americanefinery worker employed by a major u.s. oil and gas company in montana be treated as inferior to an american movie producer in hollywood and an american newspaper worker in new york's wore an employer of the foreign owned refinery in illinois? another tax measure that is misleading can be labeled -- is the foreign tax credit provision.
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this provision applies to all u.s. companies with overseas in, and as been in place since 1918. it is meant to protect u.s. competitiveness abroad. again, u.s. oil and gas companies are already treated differently than other businesses under this provision. it includes unique and prescriptive rules on our industry requiring us to prove our foreign tax payments are indeed income taxes and not realties. if these rules were changed, our foreign based competitor is on a full range of foreign government own oil companies would gain a cigna vacant competitive advantage. -- would gain a significant competitive advantage. they are economy wide, it generally available deductions and credits under the tax code. removing them for a select few
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is nothing less than discriminatory and a punitive tax hike is jeopardize the jobs of american workers. doing so would do nothing to reduce the prices americans pay at the pump. gasoline pces are primarily -- bayer said in the mketplace by global supply and demand, not by companies such as ours. furthermore, punishing five u.s. gas and oil companies would generate far less government revenue and if we were allowed to compete and produce our nation's resources. in august 2010, 10 to $17 billion in this untry is at risk per year if the section 1 is repealed for our industry. another study found out that opening up federal lands could generate 400,000 new jobs by the
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year 2025. another analysis shows such actions could generate as much as $1.70 trillion in government revenue. raising taxes on five u.s. oil and gas companies is simply not the way to reduce prices or raise revenue parade increase in these companies taxes would only discriminate against certain u.s. workers and make our companies less competitive. a much better solution lies in permitting our industry to increase energy supplies, including supplies found here in north america. access, not taxes, will enable us to meet our goals. exxon mobil shares these goals and we look forward to working
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with you to achieve them. thank you. >> thank you. gentlemen, we appreciate the time -- you taking the time to come here. let me tell you my perspective. as chairman of the finance --mittee, we've got to find we've got two ways to reduce our annual deficit and debt. it is not an easy task. to do so, we have to find an apprch that is balanced across the board. find a fair solution. one shared by americans to be pretty fair and balanced. what you said is true, you do pay high taxes. that is true. it is also true that your foreign taxes are higher than your domestic taxes.
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your domestic tax rates is quite a t lower than year worldwide ra. it is also true that the price of gasoline is determined primarily by t world price. that is the primary determinant. it is also true that when the world price goes up, the after- tax profits of your company's go up very significantly. your cost do not go up as much as the world price has gone up. your profit margins go way up, that is true. it also seems to me that based on the evidence, according to your financial report, if ur average cost is roughly $10 a intangible you add ain
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drilling, it goes up to $20 a barrel, but your after-tax profits would be about $72. your gross revenue is much higher this year. this is not a matter of singling anybody out. it is not based on your subsidies, is based on the price of crude. mae a fair way to get at reducing our deficit and debt is to eliminate the tax breaks which to not have much an effect on your decisions to produce. it does not have much effect because your profits are so hi. according to reports, exxon mobil after-tax profits go up
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to $375 billion a year. your after-tax profits built up a billion dollars. altogether. subsidies we're talking about here, there are $21 billion and break that down to a quarter, that is 5 ended million dollars. -- $500 million. this is rough. if the price of oil were to go down $2 a barrel, tt would be more than the elimination of these subsidies. these subsidies do not have much effect on your decisions.
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your rate of return, different locations, that has a much greater effect on your ability to produce. tell me what is wrong with my analysis. it seems that you're making a lot of money. it also seems that the subsidies are not really that necessary anymore. many of them were given many years ago. 199 was the aftermath. it was intended to give american companies and export break. congress passed 199 for everybody. it was kind of a get, 199. other companies do use it for export. you do not as much.
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it seems to me that as we try to get our deficit under control, and oil prices are so high, and cause yourubsidies are so low, the increase in crude oil prices, you do not need it near as much as one might initially think. >> to the couple of quick points. if you look at the waist to impact the deficit, the way to impact the deficit and get more money into the federal government is through more production. pay more bonuses for the access, we pay more royalties on the production, tse numbers are much larger than anything we're talking about. that is the way i think to
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impact the deficit. i did want to comment on your production cost chart. i think in this is a pretty important point. the investments that have to be made to produce oil and gas adds to the ongoing production costs. the time line from when those investments starts to wind up production starts to happen. the other piece you miss is that it looks at all the existing production exist across the country, i would assume, but the cost of future production is not the same as the cost of the stark production. it is more expensive. >> anybody else? >> i think it is helpful if we talk about the past or the future. a lot of the numbers you are notlaying -- they're
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entirely accurate. they're really talking about things in the past and what we have already done. we invest in resources that deplete, so we constantly must replace those if we want to have a sustainable business. we've been around for almost 130 years. that is what we have been doing for more than a century, taking the revenues from the past decisions and finding ways to invest that to replace the barrels are depleting. if we have to go out and find and locate those replacement barrels, they're more and me difficult to find. the real question is not, can be enforced -- can we afford more taxes? that is not what we're doing. we are sustaining the viability of the enterprise for many years to come, so we have to make a very large investment. the real question -- what did these taxhanges mean to that next investment decision that
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we're going to make? that is made on in assets by asset investment by investment basis. if i want to look at a shell oil police in north dakota, i have to run the cost of acquiring those leases. i have to put the tax burden on them. you give me a different tax burden, my combat it -- i do not get to develop at least. i will take my capital since the u.s. is not attractive and i have to go somewhere else. offshore, you want to raise the incremental cost of development. it is that marginal beryl that you were going to take out of our system. >> i wish i had more time to talk. my time has more than expired. >> thank you, mr. chairman. president obama and numerous congressional democrats have
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proposed raising taxes on the united states oil and gas production. in an article from tuesday, mendez and knowledge of the legislation was slated for a vote next week. it will not do anything about gas prices exceeded it in $4 a gallon in some places. with rising taxes, will lower the gas at the pump? >> raising taxes on producers raises the cost of crude oil and the cost of crude oil is the prime ingredient in the price of gasoline. raising taxes will not reduce the price of gasoline. >> ok.
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do youll agree with that? >> i certainly do agree with that. if the production year and the united states, you do not have access to it or it is disadvantaged, that move somewhere else. therefore, the jobs move somewhere else. the trade benefits move somewhere else. >> ok. >> i do not believe that raising taxes will lower prices. i do think the important thing is to have a competitive fiscal environment to attract investment, more investment can raise supply and have an effect on prices. >> raising tax will lead to less investment, ls production, and higher cost per gallon. less employment. >> beloved little immediate effect -- it will have them - it will have little immediate effect of fact -- a fact.
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it puts me pressure on refineries and they are already losing money most quarters. it will lose more refinery capacity, it means more imported products rather than refined product here. >> my colleagues in the state of new jersey introduced a bill that would increase taxes on the top five oil companies. he said that these so-called subsidies only benefit big oil and ceo's. i would like to point out to my friend that actually, corporate management only makes up about 1.5% of the shareholders. there is a chart that is showing -- this shows the top 10 holdings of the new jersey
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public employee pension fund. as you can see, exxon mobil and conocophillips are listed among the top 10oldings. with increasing taxes on you company affect your earnings? >> increasing taxes and would have an impact on our earnings and ultimately on the value of our companies valuation and the shared performance to our shareholders. >> and all these pension funds. new jersey is not the only state with pension funds. >> that is true. if you take all americans and retirees and employees, and if they are involve in one way or another, they probably are shareholder in an oil and gas company. >> to agree with that? >> raising the taxes would affect our cash flow. the ability to pay dividends.
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it can affect the overall cash flow and financial manement of the company. >> one last question, i am sure you are aware of e united states has the highest statutory corporate tax rate. according to a database that collects information from company's financial statement, the industry has an effective tax rate of 41.1%. other industrial companies have a tax rate of 26.5%. yours is a very high tax rate. all the taxncreases we're talking about would eliminate incentives to produce oil and? -- wle and gas within the united states. did these tax increases encourage you to produce coal and gas? outside the united states rather than doing in here? anyone can answer that. >> certainly, tax is a big cost
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of doing business for us and is considered in all decisions that we make. to the extent that taxes are higher in the united states, we will look elsewhere. with all the provisions that had been considered, it will make it more difficult for us to do business. it will raise the cost of doing business. it will produce less in revenue, fewer jobs, and did against the president's agenda. >> my time is up. >> thank you, mr. chairman. this is not the first time that congress has dealt with this issue. five years ago, the suit are serving as ceo's of your company were passed -- were asked whether they agreed with president bush paused statement. $55 oil, we do not need incentives for oil and gas
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companies to explore. conditions today are pretty much ke they were in 2005. record profits, a price hikes, but certainly above inflation. you were at the hearing and would i would like to do for the committee, we played a portion of that hearing were the oil company ceo's said they did not need incentives from the federal government when oil was at $55 a barrel. could you just showed that video briefly? >> would $55 oil, we do not need incentes to oil and gas companies to explore. there are plenty of incentives. today, the price of oil is above $55 per barrel.
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is the president wrong when he says that we do not need incentives for oil and gas exploration? if i could have a yes or no answer. >> no. i doot think our companies asked for incentives fo exploration. >> agreed. i said we do not need, but we do need access. >> just a yes or no. >> yes. >> correct. >> yes, yes. >> the reason i wanted to get into this is today's condions are much like they were into a dozen 5. that is why i mentioned the profits. with respect to oil and gas production, we do not need
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incentives. oil is now right around $100 a barrel and my question -- if your company did not need incentives torill for oil a $55 a barrel, how in the world can you possibly need incentives when oil is at $100 a barrel? >> at $55 -- we look at the past. the easy toind oil has already been found. taxes have gone up trade quarrel is more challenging to find. -- taxes have gone up. the oil has more challenging to find. we do not give the items that we are talking about, foreign tax credits, section 199, we do not
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view those as subsidies. we've you those are a similar types of provisions that are made available to other companies, all industries in a similar way. we do not need incentives to drill. >> i am talking about industry specific incentives. percentage depletion, intangible drillingosts, deal logic and geophysical costs, these are industry specifiincentives. you said that you did not need them in 2005. markets were global into a dozen 5, it's just as they are now. i cannot understand how even if you account for all of the possibilities in the world, how you can make the case that you need these industry specific incentives when oil is at $100 a barrel. >> intangible development, we
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view these similaro research and development, technology, similar types of provisions that are made available through other industries. >> those are industry specific incentives. >> they are very similar to what is offered to other industries as well. >> you also get the research and development credit as well. your predecessor at chevron said that he did not need incentives at $50 -- at $55 a barrel. >> i would like to offer several comments. you talked about percentage depletion. the companies are -- perhaps there is so -- there is some confusion about what we are eligible for. >> we're talking about industry specific provisions. that is what the president was talking about. that is what i am talking about
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today. he just said incentives and to you all said you did not need them in 2005. there seems to be a different story today. >> we are not eligible for percentage depletion. >> you are eligible for a lot of incentives. >> we have seen cost rise dramatically in our business. any number of iustries would tell you that the cost of doing business has more than doubled. we are not asking for special treatment, we are asking for the same treatment to other industries. >> if you look at what the congressional research service has said, and they sa that recently, you will continue to go way beyond inflation in terms of your costs. if you took inflation-adjusted prices today, the price of oil is higher than it was into it doesn't buy, that is adjusting for inflation today. >> thank you. >> thank you, mr. chairman.
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i welcome all of you here today. i feel like i w in a time warp. i was there as well in 2005. the greatest travesty for this untry is that we do not have energy policy. i do not know how many energy crisis there has to occur in more than a generation to prompt and compel the president and congress to develop a comprehensive energy policy. it has transcend -- it transcends many administrations. if the hearings did not result in action, increasing debt policy, we let down the american people. we should be examining all aspects and all facets of what we do at. we should examine all the subsidies and all the tax incentives that werovide. we put many of them on cruise control for so long.
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the challenge that we're facing today -- we of not looked at them in terms of their effectiveness. we need to have the energy policy. the congress ought to do eight and that is why people are asking. i think that is an abject failure without question. the real issue for us here today is taddress these effectiveness of the tax incentives that you are given in your industry. you provide a very basic commodity to the american people. in my state, they paid $3,500 for oil and electricity and another 600 critics 6 $200 for gasoline. their pay in the third highest consumer bill. we have to look at everything in terms of what we can do to mitigate those prices not go back into a dozen 5, -- mitigate
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those prices. oil has gone up 87%. gasoline was $3 and now it is more than $4. what can you tell us that we can tell the american people how effective these benefits have been to your company in helping to mitigate those prices? there was a report that was done for the american petroleum institute last august and it talks about removing these taxes that would alter the break-even point for oil. if oil is priced higher than $80, the removal of these incentives will not result in any lost oil production.
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is there a point at which we remove these incentives, a price point beyond $80. i would like to have your response to thaas well. first, what about the effectiveness? what can we tell the american people? how are they benefited? that is what we have to examine. >> i understand some of the concerns. in california, we have very high unemployment -- we have very high gas prices and a very high unemployment rate. the policies that we have had over the last decade have provided some benefits in ter of u.s. oil production. last year, we did increase will production because the open deck acreage to development and we had a stable tax policies in place. what we have seen recently i
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that we have not conducted -- we have had a moratorium on drilling and you're contemplating tax increases that will only new production in the other way. some of the studies and i have seen indicate that the impact of a $5 billion increase on our industry would have a dramatic impact on production going forward. they talked about reduction in production of some 400,000 barrels a day. that is the dilemma that i think we have been we think about increasing taxes on the producers in this business. >> even in the context of record profits? >> we make about 6 cents on sales. we make about 6 cents a gallon on gasoline business. if there is a big concern about gasoline prices, federal and state governments make 50 cents a gallon.
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>> i could not agree with you more about needing a long-term energy policy. we have to get to the fundamental issue here, which is something that has to be addressed. you need a real strategy to execute to do that. s the current tax structure held investment? we are in a position today where the u.s. is competive. we have made about $3 billion and gear in in come from just the u.s. and we have invested about $6 billion a year in capital projects for new energy projects. that shows you that this business is competitive. the issue and to address the more fundamental issue, to provide more access, bring more production online. i can give you a very clear example.
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it the look at offshore alaska, the university of alaska has done some studies there, it is an enormous resource potential. of the estimated number of jobs associated with developing that resource is over 50,000 for a multi decade. of time. the amount of revenue that would come from developing those resources is something on the order of $200 billion. there is a real opportunity, but we have to take a longer-term view. >> thank you very much. >> thank you, mr. chairman. thank you for coming. one of my colleagues suggested that this hearing is nothing mo than a dog and pony show. you would have an easier time convincing the american people that a uniform just flew into this hearing room that these big oil companies need taxpayer subsidies. that is a real fairy tale. the average american family in
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dallas at the gas pump across america and being asked to sacrifice because of the budget deficit, certainly does nothing this is a dog and pony show. i would like to ask my colleagues here about the question of priorities. we sit in different seats than you do and your job is to maximize what is good for your stockholders and good for your employees and be all understand that. we have to to his priorities in right now, we have a huge budget deficit. many hav said that the budget deficits says we shod c aid to students who need to go to college. we should cut cancer research, we should cut a homeland security investment funds. it boils down to priorities. we have to get the deficit to a certain level and we have
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choices. i want to ask you, did about your priorities. do you think that your subsidy is more important than the financial aid we give to students to go to college? could you answer that yes or no? >> that is a very difficult question. >> we have to weigh thostwo things. we have to wait because we have to get the deficit dn to a certain level. if you had a choice of one or the other, which would you choose? >> senator, that is a choice that legislative leap you will have to making. for our company, we are asked to provide energy in an affordable way for the american public. >> you wouldhoice -- you would
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choose the oil subsidy? that is what you're telling me. most americans, even those who worked in the oil industry, would probably agree with. your company put out a press release yesterday. here is what the headline was. conocophillips highlights solid result and raises concerns over un american -- are they gonna -- are they on theamerican, too? >> nothing was intended artfully or anything like that. r. release specifically refers to tax proposals. >> i want to ask you a specific questi. do you think anyone who advocates cutting necessities is unamercan?
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it was releasethat sent its. yes or no? >> maybe you could hear me out. it is a very important question. >> do you apologize for it? >> make no mistake, were these proposals enacted, if they were enacted into law, they would place the u.s. companies -- >> i have limited time and i know your view on the issue. did you consider it on american to have a different view? >> proposals under consideration are going to have a very adverse impact with respect to energy policy. >> sir, there are many people disagree with that not " you have your point of view and that
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is why you are year. do any of you others consider it unamerican to be against the subsidy that you are for? >> thank you, mr. chairman. >> very difficult to follow the unicorn from york. [laughter] who has a very sharp corn. are you all right about there? [laughter] sometimes a unicorn can morphed into a rhinoceros and you do not want to mess with eight rhinoceros.
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i met with a young man yesterday's new was the manager of a small exxon refinery. partly owned by citgo. he was seriously concerned about his job security and his other employees working in the refinery because of the legislation seeking to repeal 199. because this refinery is partially owned by citgo, a repeal would not the fact his interest. i call that unamericna. why would be taxing the u.s. company and letting him do his
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thing and not -- in central america. there might be some confusion when some of my friends claim that removing these tax expenditures will not have any impact on the domestic oil industry. why would this young man think differently? has the refining sector read scene is much profitability as the oil exploration sector? our jobs juliet risk of these taxes are revoked? >> if you look at our own refining operations, refining has lost money five of the last eight quarters. we made some money in the first quarter and lost money in the fourth quarter. it getsack to what is the price of gasoline. it is fundamentally the cost of the crude oi we are one of the largest refiners in the world. we produce about 2.5 million barrels of crude oil. we are in the market having a purchase every day to feed our
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refineries. when the cost of the oil is high, the refiners margins get squeezed. refiners to struggle with very thin margins, so when you increase the tax burden on the refiners, you erode his margin. when you lose money five added eight quarters, it is pretty skinny already. >> i appreciate your answer. it was my marching orders -- now a and understand, to present the statement by a -- have one minutes 37 that i will yield back and i would like permission to express his statement at this point if that would be permissible. i do not want to tread on anybody's time.
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>> bill add. -- go ahead. i will skip a beat thank you's. he goes into how important this issue is, a multitude oareas impacted on the cost of gasoline, that we do not overlook the main factor. 70% contingent upon -- it is easy to understand any fluctuation in its global supply and demand. he goes into the fact that we are already reliant on foreign countries and this commodity is traded on a global scale.
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increase production cannot serve as an immediate magic bullet for solving rising gas prices, but it is a strong start. he supports the domestic exploration and drilling and to fight against our 9% unployment rate. while they pursue any policy that is counter to any job creation? he indicates that the proposals would be counterproductive. he has a video. i am not a video man, but we have a video. over already.
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>> there is no other senator. >> i appreciate that. we were not joined at the head. if we could play this thing and i will be a lot better shape with my colleague. >> it is only 30 seconds. >> 30 seconds. here we go. >> you are right in front of the television. >> could amount to twice the reserves we have in the united states. when you are ready to start drilling, we want to be one of your best customers. >> that was 30 seconds. the president called for reducing foreign imports by a third. there is a serious discontent and that is the comment that i truly appreciate. i appreciate your lenience and your treatment of this poor
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minority member. >> thank you, mr. chairman. i know the subject of this hearing is about tax subsidies and the effect on the deficit, but i would also like to get your opinion on this issue on the price of oil because many americans are feeling the impact at the pump. his testimony talked about how oil a global commodity and that oil companies are price takers not price makers. i am assuming that people agree with that generally would that statement. what role do you think excessive speculation in the futures market is having on elevated oil prices? i know that some of your colleagues -- you talked about speculationnd a weakening dollar having more effect than
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supply and demand. can you comment about speculation? >> it is very difficult to precisely say what impact it has and is also difficult to separate in the marketplace speculation and risk management. the two are quite intertwined in terms of how people manage the rest of the price of the fuel, whether there are -- whether they are a consumer or producer. i would give you one benchmark. immediately after the libyan outbreak, within the next day, the price of oil went up $12. it nothing had changed in the global supply the next day, but what was the market reacting to? it was reacting to some level of insecurity about what the future supply was going to be. that is people pricing end -- in what they believe their costs is
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going to be some time in the future, a building in their concerns and their worries about other possible supply disruptions and the ability of the market to respond to that. as people see how the market response, it just back. >> what you think the price would be today if it was based on the fundamentals of supply and demand? >> if you were to use a pure economic approach, it would be said at a price to develop the next barrel. >> what do you think that would be? >> it is pretty hard to judge, but it would be -- is gone to be somewhere in the 60 or $70 range. if i had access, that is the assumption, to the next marginal beryl, what would it cost? as -- as a design developed that, the nt barrel goes up.
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the industry has done a very successful job of mitigating facts through technology advancements, and efficiencies, the things we have learned how to do better to keep the cost down. in a purely economic -- if people did not risk managers, it would be set at the marginal cost of the next. >> 60 or $70 a barrel sounds pretty good today, i can tell you that. oil dropped 5.5% yesterday. lastly, it was 8.6% grade i do not think it has to do wi the dollar or whether it s to do with a lot happening and the volatility of the market. i am curious as to what you think that the volatility, what we should be doing about the volatility?
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>> some of the factors that i mentioned are clearly factors. at either one may be dominant in the current week we're talking about, but all those are very real factors on the price. on the topic of trading, i am anything but a trading expert, but it has been studied many and -- many times. tried to understand some of the questions that you are asking. what is the increase in price that can it does serve a very important function. >> with 70% of that market now being made up of speculators, that it is going to have been the market made up of people who
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legitimately have to hedge dominated by 70% of people who are just getting in on this oil gain. that is a problem. do you agree? is that ok to have the market dried up? i see you smiling. do you have y comment? >> we are not traders. we are physical buyers and sellers of barrels. the market decides based on their view of the teacher.
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comedian. they are being hit really hard. i am sure my colleagues will be happy to tell taxpayers what he supports that. i agree about the dog and pony show. these companies on average are making about $25 billion projected this year. only in washington they would be eliminating those tax increases. i am glad i did not hold my breath for that. calleday's your company proposals to eliminate wasteful
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oil subsidies on america. do you make those accusations lightly? they are co-sponsors. t think that president obama is an america a cassie has the subsidies? we have expressed cutting oil subsidies. >> there was the title of our media. it is not intended to be personally directed to you. it was merely utilize in a way that we felt the tax proposal was under consideration. it was inconsistent with the treatment of all taxpayers and to highlight and select five
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different companies. >> if you believe that the proposals, which to classify them as un-american? i think that is beyond the pale. i was hoping he would come here and apologize for that. are you willing to apologize? >> you are not willing to apologize? >> the tax ones were under consideration. they were inconsistent with out that energy policy. they are unwilling to apologize. last year, eco phillips spent $ million buying back its own stk.
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as for tax payments they get a u.s. foreign tax credit. how are they not? those are rossi payments. >> they are paid to the government. they must prove that these are incomeax payments. the house 35 auditors. they look at these very thoroughly. weust prove that they represent income taxes. if you pay as a structure, the
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irs is not have a lot of opportunity to dispute that. if you divide your agreement in such a way that having the payment of royalties be attacked, you get a deduction here in the united states. that means u.s. taxpayers are subsidizing it. i find it hard to understand how you can come here to the american people. you simply cannot do it. the market is driving the to exploration. you did not need this to pursue this. somehow the loss of $2 billion a year means the only make $123 billion in profits. it is still pushing. somehow unique to go back at
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them to make it operate. it is hard to understand. i really thought you come here and a different context. you are really surprising to me. i am shocked that you are not willing to the knowledge that your company statement is also the only passing an aspersion upon all of us. >> thank you. i think all five of our witnesses for being here. think the best thing we can do is have a growing family was stable energy prices. i do not think they have less to do with the ability of the pension system. the math here is so
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overwhming. i do not want to say that 4 billion is insignificant. it is a small amounts of money. i think we have to put this in the proper context. it seems to me this is one area we should be able to reach some common understanding. the long-term impact will allow us to make sacrifices. there is a reason why we are looking at this.
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we had championed this. that issue is the supply of oil globally. that is with government and transparency. the countries are incredibly ploy report. -- are incredibly poor. it is used in many cases to define this. it leads to the instability of when you have systems that are not transparent. people will stand up to that. we have an unstable supply causing investors to put money there. we have been looking for some me to support the transparency initiatives.
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many of the oil-rich companies do not participate in these industries. we were successful in getting part of this. it is being related to the sec. it is being paid by the oil and gas companies to other countries. then we can have more transparency in better government. the industry has been helpful for us? there seems to be a reluctance a this applies to all companies. we have friends in europe and other countries that want to see
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this worldwide. then all companies will have to disclose these payments. there was when other countries. we stood up to that. we knew this is not in the u.s. long-term interest. i would like to get your response. we can get more stable countries around the world. it is in our interest. we need your help. i am curious as to why we seem to be at odds on this issue. we hope that you comply and help us make sure this is implemented in a fair way. this is the reason why i directed the question. >> i appreciate your comments. it is pretty clear that we
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support the intent of transparency. we were quite hard the various initiatives. some of the comprehensive and cut that we have tried to get is that we try to do it in a way that the stop force them into an uncompetitive situation. it recognizes the challenges we have in terms of searching out that balance. there are complications associated with it. we try to get to the right answer. we have exclusions. it seems to me that we are in complexed with the standard contract. >> the bike and offered a couple of comments. we have been very active.
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with that. the nature of youtravel and the size, i do not think you have any primary idea of what the scientists of this does to the american people's willingness to accept what you have to say. i think you are really out of touch. they will cut this and have. there are all kinds of things. i come from west virginia.
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i care about hedge funds. a lot of things will take enormous guess. my guess is that you will be able to protect yourselves. of companies have been able to do this through friendships and lobbyists. you are able to prevail. you've seen me will prevail. it increases the details between us of india. i do not know how serious you are about this. we were terrified appear. we have a meeting with the president yesterday.
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it means all kinds of things just happen. let me stipulate that. i think you are out of toh. we are deeply committed. we share nothing. if the sre nothing, you are slow. if you give up something, what have you, that is the rest of it. they maye point about the $55 a barrel. now your at $102 a barrel. you talk about moving overseas. how much profit to you have to make to not be needful of the
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we have a responsibility to mee everyone. they are experiencing as tobacco questions and determine priorities. this is our job. it was 1960 -- 1916 when one of these were put into place. we were drilli. it is roughly 15 to $17 a bill. banks have changed since then. it is healthy to look at whether or not when we were developing then, it this aundred dollars or more. it is very different.
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it makes sense for them to subsidize. it subsidizes at you are doing. there is not enough competition. they can choose not to pay. people are extremely concerned only have to make choices. the question i would have is looking at the last three months. they enjoy corporate profits together. there is one cermet to 2% of the profit.
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you have massive profits. taxpayers to keep providing 1% to 2% of your profit. my question is the opposite. he will bring the gas prices down. >> it is not a subsidy. it is a legitimate deduction. what would it take? the ruling cost structure, the structure to incentivize and help people go out invest in the next supply today it is largely
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coming from the sources. >> i'm trying to answer a question. he mayet a higher. 2% that wern to are talking about. we are looking at the site turned to look at it. we have to make choices here. what is affected? what works? it is not credible to say that we are going to raise gas prices because we are asking you to forgo one to 2% of the process. we are held hostage. we take away 1% to 2% of your
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profit. that cause you to raise their problems. what will give you the lowest? they will cause you to raise prices. how much more do we have to get you? >> i did not say we would have to raise them. there was a real threat here. >> they want to solve this by getting more there. it would generate additional revenues. this is the role that t structure pays. -- plays. >> i appreciate that. we have to decide where is the most effective place to invest
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dollars. my people what to expect every single dollar. how much do we have to give you an order to bring prices down? we are n asking for tax subsidies. we are asking for subsidies. we have to start drilling. with more drilling we will create jobs. that is the best thing we can do. >> we are hoping they will be able to do that as well. i know i am out of time. >> we are not asking for subsidies. it cannot be consistent with increasing investment.
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thank you. >> it is striven to the u.s.. this will drive us there. this is simply to look at the enormous opportunities the u.s. has to create the jobs and additional revenue which will help the long-term deficit issue. >> good morning. the american consumer naturally is quite concerned when they go to the pomp for gas. what they are concerned about is they see the price of the oil
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going up. the price of their pumping goes up. when the price starts coming down, they do not see it lower. they noticed that back in 20008 that the price shot up to $147 a barrel. while they are pumping gas, it raises to $4 a gallon. now they see the price at around $100 a barrel. you can still pay it at the pump. i want to ask that question on behalf of the american people.
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>> it is a question of a supply chain. it takes the average time for crude oil produced to reach american refineries between 30 days and 45 days. this is yardy fembot and prayed for. -- this has already been bought and paid for. the consumer pulls up to the pomp and buy it. when the price changes, it has to make its way through the entire supply chain. when the prices are going up, the retailer who owns the station they are not owned by us. they are owned by distributors.
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they have to think about what will happen to the ministry. they begin to price up in advance of how the barrels are getting to them to ensure they have sufficient cash flow. that is why going up is going to chase is a little faster. they had to recover the cost of what they have already spent. the consumer is not going to see it. that may take between two and three weeks depending on how big the movement is. >> i anticipated that that would be the answer. i appreciate that. the person who is pumping the gas is saying today i am paying $4 for a gallon of gas and oil is selling at $100 a barrel.
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three years ago i was paying $4 for a gallon of gas and oil was selling at $147 a barrel. why? >> the price and not last very long. you remembered what happened shortly after. this is the nature. we talked about this earlier. this has an extre ount of volatility. we could have an entire hearing on that subject. >> i would say there is a part to the speculation that as did that. people do not use the oil. let me register a difference of opinion would be key. you are all in your financial report in the fourth quarter of last year.
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you announced that the gulf oil spill was good to be a problem. you reported a tax credits of almost $12 billion. for activities that cause such harm, does it not seem wrong that you would take as a tax credits on the payments that you are paying out to make people's lis right? >> let me first, that we have pledged to meet every commitment under the law. there is the economic impacts. the 41 billion is a financial charge.
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we did not take the credit. in termsf writing inff, they take it off as you occur. >> you consider these as standard business expenses. >> the ones that are under e tax code, yes. we will not write about things that are not under the standard businesses. it is interesting that when the boeing co. had these payments they did not take it as a tax credit. it is also the other company. goldman sachs was the same thing. because of the sensitivity, surely the gulf oil spill was a result of the long doing. e what to claim that as a tax
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credit. i respectfully disagree with your position. i would urge the ranking member to consider as he may be entitled but it does that make it right. i wld ask respectively that we consider changing it. >> there was a request. we finish the question. >> thank you so much. about a month ago, right in the middle he is to be the vice chairman.
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we are asking a group of really smart people. i think he said the guerrilla and the groom was health care costs. they get worse results. he said that is the an a pound gorilla in the room. >> we find out what works. we do more. that is what he said. to more of that. our republican friends were over there. we are having a conversation about deficit-reduction. this is the route the
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later this year we will be voting on an exit strategy of about four trillion dollars. we would you that largely on the spending side. entitlements of be on the table. taxes benchers obe on the table. this should be the end of the conversation. we should continue to configure how to get better. your iustry needs to be involved in that as well. i do not pretend to understand it especially well. i would not consider myself an oil company.
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most of you do that. the efforts you are undertaking is moving us away from the process. there are sources of energy. will does it. enables us to come up with new things. they find themselves around the world. do you want to go first? tell us what you are doing. we develop renewable. what can we do to help you there? >> i agree wholeheartedly with your comments on the deficit. ultimately, we are an advocate for tax refo. all of these things should be on the table. as to what we are doing in developing alternative skills, this is what we know the best.
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we are not into windmills. we are not io solar. as we have evaluated all the technologies, the one that we believe has the most promise is to capture by appes from houses. we undertook a joint bid share. we had $6 million. they have considerable experte. we think we will have to synthesize the type of ones that are necessarto scale up. we have to take this to scale. it has to be delivered at cost that the consumer can afford. we believe there is a lot of promise. it is a long road ahead of this. >> thank you. we continue to ramp up our
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spending. we have a program that expresses its. fossil fuels will continue to represent more than 80%. it is required around the world. one of the key things that is important is natural gas. technology developments, some thought it was for decades. we are really applying a lot of research and development. how come we do it more efficiently? we think our country is well blessed with these resources. >> thank you. we think of oil and gas as the main driver in our business. incremental to that is alternative energy.
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we invested $7 billion over the last several years. it is a growing business. it is difficult. it is growing. >> we do consider ourselves an energy company. we want to be the most innovative and competitive energy company in the world. that is the perspective we are in. we have recently formed a $12 billion joint venture arod current technology for producing large scale amounts. we take it tohe next level. we are talking about using
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enzymes. it goes straight from the biomass to a gasoline or diesel equivalent. >> we are the largest producer of renewable. that is a very accurate business for us. we believe it'll be sometime before they come to market. there is energy efficiency. it makes investments. it has energy soon. that is a big opportuni. >> a couple of us have a couple of follow-up questions.
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i think there is that anyone here who this not do this. what we mean by comprehensive tax reform, the general feeling is the the broadens the base. th seems to be a trend. it is similar on the corporate side. we lower it. by definition of we are doing that, we are starting to cut back. whether it is biofuels or what.
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your general advice to us, does that mean that maybe we should lower the rate and also cut back? by definition we have to. this is hard to do. >> i would support all of that. i think everything for everybody everywhere has to be on the table. we will repeal a for everybody across the board. the city will broaden the tax base. i only use 199. there is a whole host of elements to our tax code that is very complex.
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simplifying the tax -- sen use it. some do not. we are creating this. we have to make it more attractive for people to invest and create revenues. >> you go along with them. your scaling back. -- you are scaling back. >> it needs an overhaul. i tend to live by making the united states more attractive. do not harm american competitiveness overseas. it brings wealth back to this country. it keeps the playing field level. we love to compete.
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we thrive on competition. >> you want to maket simpler? make in a way that is consistent for everyone? there is certainty that we do not anticipate. it will promote investment. this will help with respect to employment. >> anything that can increase competitiveness in terms of investment i think would be good. the more predictable the better. john number one is to get investment up. >> what is your view? >>
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