>> what is your view? >> it is exactly as we have been saying. some of the complexity is taken out. they make it too complicated. much business income is no longer incorporated. it is worth individual income taxes. this greatly complicates the question. we have more on this basis by far. it is a recent trend. he may want to be an investor. let me give you a chance. >> i am glad this came up. it is very important.

i think comprehensive reform, i agree with the comments. >> i a agreed. i would hope that over time it would raise more revenue. i think this is what we are trying to achieve. >> you are talking about the subchapters. this is an important one. so many are structured under the tax code. if you do it with corporate tax, we will have to deal with that. once it is structure he can allow them to check the box. they do not file under the corporate tax code today. it is not advantageous for them to do so. they may find it to be more than

having to file it on the individual. >> this is the dual capacity question. all companies should get a tax credit. foreign taxes are paid to the important countries. that is the general rule. he did not give a credit for royalties. i think the question is characterized in the payment. i think the goal is that it is the first place to structure it. in the company probably gets that credit.

it is trying to figure al what is this. maybe some move along. companies might make a profit. it is attractive. is the goal. >> i appreciate the recognition of that. i do not disagree with what you said. it is the complexity of dealing with the whole country's tax system and how it is characterized. it is a difficult task. it is one that we must prove to e irs.

much to understand the challenge. others have talked about going to a system of a tax code that is more aligned with what the rest of the world has. it is getting is structured so it does not violate the principle. some companies are at a disadvantage overseas. i thi that is achievable. we have a way to move a system like that. that simplifies an awful lot of the complexity that exists. >> ts is going to be incredibly difficult. it will require good faith of everybody.

it has to be shared. everyone will have to get in a little bit. >> thank you. >> i would like to comment on a few items. they implied the roughly60 billion in tax incentives that we were discussing is the key factor in reducing our deficit. my friend from maryland made a similar one arguing that the numbers are insignificant. we are worried about the removal affect of these domestic services.

the testimony is clear. this will drive production offshore. this is what has been said here today. there were spending cuts proposed by dr. coburn of similar size. it was a member of our committee. the spending cuts by another version of shares sacrifice. it did not involve low income folks are infrastructure investments. this is an example.

there is no bones about it. if he took off five of you if we combine them all it did give them only 6% of the world oil production. 6% of the global oil production is less than 2% of global oil reserves. we are requiring them to go out and the world. there are nationally owned oil companies. this is 1.4%. look at the opec nature --

nation. it is right on down the line. here is where we are. we are this small little sliver. all these others are opec companies. they are the production facilities. you are the big five american companies. am i wrong? there is a small slice of production. it is listed on the church. these numbers look like this as well. we do not represent the reserves of the production. we do represent an important purchase of pan and the

development. what you had with the rep with our share of what we want. >> did i hear the correctly? there is enough domestic energy production. i believe you said that you did it to develop oil reserves. it has over a $4 billion to produce domestic oil. the government will refuse to allow you to go ahead. >> it is emphasized by what is happening in alaska. we are something around $3.5 billion in.

you have to be able to dso. want to emphasize the impact is something like that. it indicates that it could be 750,000 barrels of a multi decade base. >> we cannot get the permission. >> this is not reflect well on the united states. >> one of the first acts was across 77 onshore. it is after years of going to environmental groups payer. we finally got there. it was one>> it was one of the strongest

signals you could send to the oil industry. could you elaborate? and also answer this question before we finish. assuming this legislation passes. will it bring down the prices of oil at the pump? you don't have to use my terms. that answer that for me. why are we doing this? why are we putting you at a disadvantage when you're that little small slice of the overall pie. and yoare competing against nations that have oil. nationalize the oil companies. >> the competitive disappointment is exactly right. the chart is accurate from what

my infmation would tell me as well. we have to be careful is not to lose this enormous opportunity in the u.s.. we have a tremendous number of resources. it is a matter of access. it goes beyond the limited part of the conversation today. to look at a real energy policy we could have a significant impact on the economy, the deficit, the trade balance and the energy security of this company. >> how do any of you believe that this bill will help decrease the crisis at the pump? >> no. >> know. >> know. >> some people are upset i have

taken this time. i am the only one here on the republican side because everybody had to go the white house. i would hope that i will be granted a little bit more time. >> i also want to know where we are at this point to 1/2 hours into the hearing. you will have done that as major oil companies, a dramatic about- face this morning. in 2005, you were there. you said you d not need tax incentives to drill for oil. today you have come to say you have got to have them when oil is at $100 a barrel. that position defies common sense and even adjusted for inflation, you're doing better now than in 2005. this debate will go but i want to make sure that folks paying attention to this pickup on that as we wrap up.

the tax credit that exists for blending ethanol. you are required by law to implement the federal rental standard. your testimony says, and i quote, bp is already one the largest lenders of ethanol and the nation. my question is, why should oil companies, not just years beginning $6 million a year in tax credits for complying with an existing law to blend ethanol? >> that law was introduced as a biofuel into the u.s. and it has been very successful. we're not opposed to the transitional incentive being phased out. we think it is important for second-generation biofuels.

>> im glad we are noting that. there is no question in terms of energy policy that often you need an incentive to get something off of the ground. clearly what he is talking about is that incentive made since the beginning, but it doesn't make sense now. i think it is constructive that you said you'd be willing to phase it out. i thank you. >> i think that we should all look at them. all the tax expenditures. all of the incentives to see which ones are more effective than others and we can get rid of a fewf them. it is a difficult question for all us. cholera about a hundred and 31 tax provisions.

they are a nightmare. it makes no sense. under an 41 times every 18 months that they have to be paid for is just maddening. we will be looking at a lot of these provisions and hers. i like to eliminate a lot of those so there is not a lot of uncertainty surrounding our side and from that side. we will be looking at expenditures to see which ones are effective. >> let me concurred in regard to tax reform and assure you that there is great interest to making sure that the tax cut is more competitive and predictable. it is extremely important for investors, and we have to get investors of knowing what the ground rules are. i will only make one comment in

response. it has all been repealed and equals about 3% of the profits of the five companies. most of these profits are going back to the sheholders. i don't sethe impact that the senator is referring to on either jobs or any of the issues that you bring up. >> they are making the point if you're going to do this, treat them fairly along with other companies. i agree that we have to do tax reform, and that includes looking at everything. i don't want them mistreated because they are an industry that people hate. >> let me bring it back to the point that has been used here.

i understand companies are taking the tax provisions are taking advantage of it. if you're not doing that, you have problems with your shareholders. understand why we think this is either unwarranted incentives or subsidies. it was a response to dealing with the fact that our corporate taxes are not border adjusted verses in europe and other countries. we did something to help foren sales. that is the genesis of seion 199. we wanted to be able to compensate for the fact that our foreign competitors had an advantage on the way the taxes were handled at the border. my understanding is that in your industry, there is more important product have bn

exported. it does not make a lot of sense for you to get a tax advantage under the phisophy that this bill was originally created for. the rule of the provisions out of compliance and we had to go to a general manufacturing provision. that is how this came about. we have questions as to whether this is a reasonable tax advantage to the oil industry. it is not traditional manufacturing. and it is not the type of export activity that was disadvantaged by the corporate structure to have a product enter the international marketplace. this is the largest single source of the revenues we are talking about today. it has its genesis of helping

the united states manufacturers get a product into the international marketplace. which is not the circumstances of the product that you're basically involved with. the final product is mostly domestic. i am sure some of it is the international marketplace. it is certainly not the target for why this was put in the tax code. anyone disagree with that? >> if you want to repeal it, repeal it for everyone. i am not sure that the coffee roasters are growing coffee here and exporting coffee. i am not sure the newsper companies are exporting their newspapers. i don't disagree with your comment or your premise. the only point is, if you want to get rid of them, get rid of

them for everybody. >> some manufacturing companies this is rough justice and it really helps them. i would rather do it directly with foreign sales. i would like to reform our tax code so that we can have a preventive basis. we should tailor this more to the purpose of helping exporters that manufacture in the uned states. >> cannot treat companies in the same industry different and don't treat industries are principle of exports differently. >> is tough to go on line. i understand the point that you are raising. i'm only pointing out that that is why some of us look at section 199 as it relates to the oil industry asn unjustified incentive or as a subsidy because we don't believe it was

the original intent to benefit your type of activity. i did want to put that into record. >> i want to repeat and expand a little bit about what i said earlier. i do believe that you are out of touch. i'll believe that that does not mean the you are not good people or that you don't participate in your communities. or along with the work you have to do. and in the main reason that you are out of touch particularly with respect to americans and the sacrifices that we are having to look at in terms of having to come close to balancing a budget is a you never lose. you have never lost. how you always prevail. you always prevail in the halls of congress had to do that for a

variety of reasons because of lobbyists, friends, all the places you do business. i don't really know any other business thanever loses. that always fails to do as well as you do. one of the problems, and you can tell this in no way is just the size of the amount of money you take. it is really hard for average people in west virginia to even come close to understanding. they don't think that that can come by in the regular order of the way the world treats them. they are always in the process of losing. everything is an uphill battle. so my view of my work in the west virginia that is mostly mountainous, it's that i am holding on to the huge boulder with both hands and trying to

push it up hill. is every day that i feel that. and i love the feeling. but i know if i take one hand off, high and the boulder disappear into the ether or the opposite of the ether. the gulch. that leads me to say, this is opinion. but i really believe its. i've never seen any industry so cosmicly successful. i think you all have a great sense of assurances as you're sitting there more so than usual. you have a great sense of assunce spearheaded of think you feel threatened by anything that is going on here. and i guess you don't have a reason to feel threatened because of the way that votes lined up in this present

congress. but i yearned for one of you to see what average people are going through. is to figure out some way in your mind, what can i do as a very large and profitable company to make sure that that bad thing doesn't happen to that person, losing health insurance or losing a unemployment insurance. the endless number of things that people have to worry about every single day. you don't have to worry about those. you have the money to have planes and our people don't. i want to stipulate that. and say one more thing. the greatest danger to this country right now other than the

deficit is something called cyber security. we're writing of bill and the congress committee of the homeland's security is participating in that. he comes up with a solution that i hope we can pass this year. there is an enormous amount of work that companies have to go to the being attacked already. the pentagon has hundreds of thousands, maybe millions of times a day but people getting secrets. anybody can do that. so how they defend themselves? they have to go through all kinds of security measures. i met with most of them yesterday. particularly the bigger ones, you're going to have to bear the expense. we don't have the money to do

that for you. we are going to be facing these problems. they said that they think that is the way it should be. we should have to pay more and began to make ourselves more secure. that is why, you know, when you talk about r&d, your expenses are like research and development for a pharmaceutical company, and that is why ihink it is wrong of you to say that. i think that is a cost that you could absorb so easily. and still do very well. but not once during this hearing have i heard any semblance of a willingness to share unless every other company also has to

a way of building of the defense that it can't happen. i haven't heard anybody talk about what they are doing, what they would be willing to do to share in the budget problem and the total concept of what keeps america together. that i a sense of fairness. everybody has to give something up. do any of you have any things that don't add on the so long as every other company does it too? things you can just stop doing and breaks that you will allow -- that you now get to the u.n. to get as a way of helping? >> i very much appreciate the comments that you're making. i can only represent how we as a company field.

we feel like we are constrained and restricted the from our opportunities. we feel we are edible industry that provides the energy that has developed this country into what it has in the standard of living. we feel we are part of the energy solution for this country. we are constrained. we're ready to invest and do far more. it is not a question of looking for incentives. put us back to work. give us access and let us start drilling. but our people back to work. >> can i just say that we feel constrained. we can't do what we want to do. maybe you are right and maybe you are wrong. i think you are wrong.

a great bulk of our people and our country that are sfering in ways that you have no idea of just don't understand. and they think that is sad. >> it opens up another subject i just want an answer from my own information. i have not discussed this at any great length. but i have said previously that you would like more access. that whatever it is, there are more access permits. as he said, mobil. this is the question that i havethere are millions of acres of leases that you are not utilizing. i am just curious what response to that, if there is one.

it does, quite frequently, that question. >> i will take you back to alaska and tryo put this in perspective. i will put it in terms of leases. we are one of the top three. sometime the second or third largest operator in the gulf of meco. about 35% of those are producing. in some stage of a valuation, it is coming forth. we have over 400 leases or that are sitting waiting for permission to move forward just to put that question forward. >> i can comment on lead times. a lot have been said about leases that are in development. we just made a final investment decision this year. it was seven and hala billion dollars of commitment.

we made the expectation that we would get permits those leases were first issued in the late 90's. we did not know how to explore or develop in that deep water. technology h advanced. we have begun exploratory drilling. that we have made decision that will result in production in 2014. there is a long lea time in the offshore area where most of the undeveloped places artoday. we're having trouble getting permitting a on the leases that we have, keeping thoeases in active, and when we talk about the opportunity that is there we have to talk about timely issuance of permits so that we can continue to explore. the other is making sure that the continental shelf is fully explored. and you have made estimates that you could create companies twice

the size of chevron with the resources that we haven't developed yet. we won't know what we have until we explore those areas. that is the opportunity we are talking about. >> the second question, the public reports, i think a think it was 2010, about 60% of the after-tax profits were invested with stock repurchase or dividends and so forth about 40% would be an investment, i don't know. it seems a lot of that money is going back to shareholders. the money you're making is a stock repurchase. why isn't more of that going into investment? how does the percentage of compare with other industries?

>> we earned about $30 billion. we invested $32 billion. we invested more than we earn. with that cash flow, we pay all of our expenses, the salary wages, the benefits. we pay taxes, we find opportunities. and what is left over, we pay the dividend. and we return that through sha to grow it and give them some and come back. i know is a novel thought here in washington. >> i appreciate what he said. i have a chart here. for 2010. it says that stock repurchases

as a% of profit was 70%. the tried a budget anything, just look at it. i don't think they are consistent with the numbers i just gave you. >> 30 billion in profits, my recollection is that we return $19 billion to shareholders last year. >> i think if the public sees this, they will think it would be better for that money to go back to more jobs, more investment, so forth. >> give us something to work on. >> how about trade?

>> i don't think i came to negotiate a trade with you senator. >> i would offer if they behave 51 $6 billion to shareholders, ultimately those dividends are taxed and the government receives revenue. when we do, our stock has gone up 30 or $40. that generates tax revenue for the government as well. and the money has been reinvested where the investor thinks it is appropriate. >> yesterday, and the wall street journal the former democratic congressman harold ford, a good friend of mine asked whether gas prices are climbing the with any elected

official call for new taxes on energy. the thought was a pretty interesting question coming from a democrat. in your testimony you say that changing important tax provision outside the context of corporate tax reform would achieve one unmistakable outcome. it would restrain domestic development and reduce tax revenues at a time when they are most needed. would you folks please elaborate on the negative economic consequences of the proposed selective tax increases that they would impose only on your industry and not the others? >> to the extent that taxes are increased, itmpacts the economic evaluations that we go through. we spend less oneepwater

development. as to the extent of more onerous tax provisions are placed on us. >> anybody else care to comment? or do you agree? >> this business came up today. generally, all u.s.-based companies are entitled to a foreign tax credit based on foreign taxes that they paid. it would be really wise to go to a territorial system. but our system is a screw the system where we are constantly trying to find ways to resolve some of these difficulties when ernie's money overseas. let me go through this. generally, all u.s.-based

companies are entitled to foreign taxes that they pay. foreign based multinationals do not claim that u.s. foreign tax credit. it isssential to most american companies with global operations. the capacity rules in place determine to what extent a payment from a u.s. company is equivalent to an income tax and eligible for the foreign tax credits. and to what extent such payment is for systemic -- such as economic benefits such as for the right to operate a gambling casino and are not eligible for foreign tax credits. the first question is for anyone on the panel the clearest -- appears to answer. is it true that it would be harmful to american based oil companies, but the repeal would

be a negligible effect of foreign based companies? the second question is, to the best of my knowledge there only a significant benefit to two sectors of the united states. in any of you confirm that that is the case that the recent proposal would still allow the gambling casinos like mgm resort, caesars entertainment or gaming in the las vegas sands to claim the benefit of dual capacity rules and you would not be able to. let me just make sure that i understand correctly. it seems to me it would harm ameran oil companies but would not harm foreign oil companies or gambling casinos. i'm not for harming those >> i don't know much about the gambling business, but i can

tell you that when tax rates exceed the u.s. rate overseas, if we don't have a dual capacity tax treatment will be ceding to foreign rivals. even european companies it is very important. the internal revenue service is willing to distinguish between royalties and tax benefits. there is very little that has been studied more than this subject. it may have been difficult a few years ago. but there is an abundant rule. is important that we be allowed to take tax credits where we have already paid taxes overseas >> i would echo his comments that it would have a devastating impact on our ability to compete overseas. this is one topic where you'll not find the companies' alliance because the competitors are at the table and they operate under

a territorial system. we would lose competitiveness and relative to them. and an already very crowded and enormously competitive world we find ourselves the space because of the growing presence of the national oil companies which already come to the game with other advantages that we don't have, we have to of setback by finding ways to out compete them. >> you are competing with national oil companies. national and international oil companies. let me finish with this comment. if i get you correctly, what you're saying is that it would be very unfair to pass this type ofegislation because it would be selective taxation against

your industry the other industries in this couny can benefit from? and that doesn't seem right to you as far as i can see. if i am summarizing this property -- properly, you can surely correctly. it would be an unfair approach and will make you less competitive if that happened. it would cost jobs, and most importantly of all it would cost real jobs. you have put a lot of people to work. people come to congress asking for help. the oil business has really helped alaska over the years. you have to put people to work, and frankly if i understand this hearing and what you are

all saying it would be unfair. and probably -- not probably. the bottom line is, and let us think any you will disagree with this, it will not bring down gas at the pump one penny. in fact, it is likely to go ahead because of the selective taxation approach. >> this concludes the hearing. i will and where i began namely that we have got a fiscal problem on our hands. we have to get the deficit down. we have to make choices and none of them are easy. twice a week ago over to the blair house to meet with the vice president and members of

the senate. home secretary geithner, gene sperling, going dallas trying to figure out how we do this -- and going down a list to figure out how we do this. the conservation programs which is food stamps. this is not fun stuff. keep that in mind, and you go back to the daily work, we can contribute here, too. we are in this together. everyone clearly once more jobs, more growth. and incentives to invest in the united states. more american investors, we find incentives to do tha

the other measures encourage investment. this hearing is concluded. i am not totally convinced that these provisions had that much or if they are taken away given the huge profit margin because the price of oil is so high. this is not going to change the price at the gasoline pump. what i see i grant you we have to develop an energy policy. there is a lot that we haveo do.

>> one last comment. i know that you are sincere enough to do that. my problem is, there is not a real good reason for raising this. if they raise these taxes congress will spend every dime. we don't have the capacity right now where a film that might work better it would cause this to go down. >> i will disagree we have to give these deficits down. so we don't come up against the death led so we can't be faulted. we have to get the deficits down.

we look good because we have to do it. hearing concluded. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011]

>> in this conversation is happening at this time in a highly political debate. when gas prices are so high. is there any truth at all to the charges made a you guys are out of touch with the american people? >> the results of heargs of that to me is i would love to invite some of the members have participated todayo get better in touch with what we're actually doing. with people that represent every element of society involved in these companies. the real opportunity to he an impact on the country we talked today about certain tax elements and certain billions of dollars associated with the tax elements. we think about the benefits,

you're talking about hundreds of billions of dollars is not ultimately triions of dollars into the federal treasury. it is a completely different conversation. >> what i said was that i was very cautiously optimistic. the fact that we have had a coordinated meeting with a across agencies, that is a positive thing is that we've been missing the last couple of years. of the means progress. >> what do you think is the real problem here? >> there are lots of individual elements. i could've said the pact that we could meet the air emissions for drilling and kept us from drilling in 2011. the bigger issue overall is the

political will to make this happen. that is the bigger issue. there are lots of small reasons. the right way for the country it would not get done. >> a year that point? >> the term cautiously optimistic is an important statement. we want to move forward with this development. it is the better thing for the country. that is really our intent to try to make s goal. >> what about your reaction? >> is helpful to open the conversation. there is even an opportunity to say there is a bigger picture here that makes a lot more deference and impact to the u.s. and then talking about a few incentives.

you can pact the economy and the federal treasury and deficit over time. i think we're building -- is good for a bit of humor, but we need to kill her. >> you know you're going to come here and they're going to grow you and put you on the spot. >> we believe in the arican governmental process and this is part of participing in that. it is supplemented by individual meetings with the members to make t points that we want to make something thawe will always participate in. >> to the point about the debates of the repealing of incentives leading to higher gasoline prices. can you make the case that would

lead to higher gasoline prices. >> it is hard to makeefitive statements around prices. part of the conversation was about all of the elements. one of the answers was that oil is flowing in a relatively short time to somewhere in the $30 a barrel range. there are so many factors you can't said definitive impact. you heard the economics. this stage -- this is a globally competitive business. that means less domestic production, and regardless of how that directly and immediately affect the price of gas, has those other unintended consequences with significant benefits like money into the federal treasury. it is much more valuable to make the proction than to squeeze a little bit more.

>> is there a possibility if the taxes were changed the the money would be passed along to the consumer any way? >> and the more likely choice is that money shifts and other parts of the world that is the way this business works. we make those decisions in the 25 per $30 billion that we spend every year. we make those decisions on a weekly basis. >> you mentioned the prices. the think his ratives are behind that. >> we don't have any reason to think there is anything negative going on. if that is the orientation of the question. those that buy supplies of oil going forward and those in the trading market are evaluating all of the facrs that are there which are not only the

shearer supply and demand fundamentals but the supply- demand fundamentals into the future as economies start to recover. i say immediate disruptions in the north african and middle east countries as we speak, you see the impact of the tragedy of japan. all the roles and to what is the price going to be in the future. i mentioned the airlines and my comment earlier. the business that wants to get assurance about what it will pay into the future will buy into those markets. that is a fundamental positive necessary impact associated [unintelligible] >> i don't have any basis to say

that. what i mentioned in the testimony, this has come up many times before. we have looked into this very deeply before. there is a negative impact here or something out of proportion. >> one more question. >> your industry is making a lot of profit. oil prices are high. how do you disconnect the for the consumer? >> let's talk about the u.s. business. this was a hearing largely about the u.s.. when you think about the numbers, all of this is about profit. we just did a rough average of our income and investment over the last five years. it is something like $3 billion a year profit. higher prices, it allows us to

invest more that has the cycle of building more supply. and all the other benefits that go back to the consumer in terms of more jobs. and an opportunity to reduce the deficit. as the picture that we were trying to drive today. >> we have to take off. >> i'll be here to take your questions.

>> we will have more about the oil industry and gas prices on today's "washington journal." on c-span 3 this morning members of the federal communications commission will be testifying at a house hearing. live coverage begins at 9:30. on cspan today, "washington journal" next live with your phone calls. then our live hills -- house coverage and they are expected to spanish work -- to finish work on