[Congressional Record Volume 157, Number 65 (Thursday, May 12, 2011)]
[Senate]
[Page S2900]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                             TAX SUBSIDIES

  Mr. REED. Mr. President, I want to talk about the provisions my 
colleagues and I have introduced to ensure that the large oil companies 
of this Nation which are receiving great tax subsidies no longer 
receive taxpayer money to subsidize their profits, and to target those 
savings towards deficit reduction, which is one of the great tasks 
before us.
  We are seeing an extraordinary runup in gas prices. In Rhode Island, 
the prices are exceeding $4 a gallon. These high gas prices threaten 
our economic recovery and they also put a brake on the expansion in job 
growth which is so necessary for all of our citizens. In fact, it is 
estimated that because of these gas prices, U.S. households will pay 
about $825 more in 2011 for gasoline than they did last year. That is a 
big bite out of the discretionary spending available to moderate-income 
families across this country.
  One aspect of this runup in gas prices is the role of speculation. I 
am pleased that the President responded to a letter I led suggesting 
the appointment of a task force to look into this. He created the Oil 
and Gas Price Fraud Working Group, and under the leadership of Attorney 
General Eric Holder, they are looking seriously at the speculative 
aspects of the runup in gas prices. Some economists estimate that 
excessive speculation can drive up prices by as much as $1 a gallon. In 
fact, the huge retreat in the commodities market for oil last week 
suggests that much more than just simple supply and demand is 
responsible for these huge price increases, and we have to look 
carefully at this.
  I am pleased to be a cosponsor, along with Senator Menendez and 
several of my colleagues, of the Close Big Oil Tax Loopholes Act. It is 
extraordinarily ironic--and that is a mild term--to see the oil 
industry receiving huge subsidies at a time when market prices are 
producing what you would think would be the major incentive oil and gas 
companies need to explore and develop, and that incentive is the rather 
substantial given prices at the pump throughout the Nation. In fact, 
these prices have transformed and turned themselves into huge profits 
for the industry. ExxonMobil, for example, posted its biggest first-
quarter profit in 8 years, with net income rising 69 percent, to $10.7 
billion. In fact, the combined profits of the big five oil companies 
were more than $30 billion for the first quarter. Those are the kinds 
of rewards in the marketplace that suggest to everybody that the need 
for subsidies from the government is nonexistent. Indeed, what we have 
seen, rather than using the subsidies and these excess profits to go 
out and intensify the search for new oil, is that most of this has gone 
to providing dividends or stock buybacks to stockholders. That is a 
legitimate use of corporate money, but it really undercuts this notion 
that these subsidies are so essential for the companies to be 
competitive and also necessary for the kind of activity they are 
undertaking to search for and develop new oil resources.
  There are so many aspects of the bill that I think are positive. They 
have been, in part or in whole, debated before. The bill ends a 
deduction the oil industry receives for the production of oil that is 
meant to assist American manufacturers, not oil producers. Some suggest 
that the oil companies only discovered this tax loophole after the fact 
but exploited it very aggressively, that it was intended for small 
companies that are producing physical products that could be shipped 
around the country; not for bringing in oil, reprocessing it, refining 
it, and getting a tax break. There are so many other irrational aspects 
of these subsidies that, again, the subsidies themselves have been 
called for a serious review, evaluation, and indeed elimination.
  The other factor that compels us to take this step today is that we 
have to begin to reduce the deficit. All of the resources that are 
being saved, we hope through this legislation, will be targeted to 
deficit reduction. We can continue to provide the necessary support for 
our economy through a healthy oil and gas system, but not to subsidize 
an industry that does well in the marketplace, and we ought to use 
those funds to reduce the deficit.
  There is another aspect not directly related to the provisions 
Senator Menendez and I support, but relates to this debate. At the same 
time as the big oil companies defend these subsidies, they are also 
pushing for increased offshore drilling, but are unwilling to help 
ensure that it is safe. For example, we have tried to get the oil and 
gas industry to at least pay more for the inspections that are so 
necessary on these offshore platforms to provide for safety and prevent 
another Deepwater Horizon explosion. The administration has proposed an 
increase in fees oil companies pay for rig inspections from the present 
fee of $3,250 to $17,000, and the companies have balked at this. Here 
is an industry that is deriving huge tax subsidies, and obviously the 
example of the devastating Deepwater Horizon explosion and spill has 
raised serious concerns about the ability to manage and safely develop 
some of these offshore platforms, and essentially they are saying: No, 
we are not going to pay more for the inspection fees that are 
necessary.
  The total increase is minimal. In fact, let me give a comparison. BP, 
British Petroleum, would be asked to pay about $1.5 million in fees, if 
this new fee structure were in effect, for their offshore platforms. 
That would represent about 0.01 percent of the $10.9 billion in 
revenues from the Gulf of Mexico last year. Yet the companies are 
saying no. When it comes to paying their fair share for inspections 
that directly benefit them, provide further confidence to the public 
that their operations are successful, and give them, frankly, more 
confidence in allowing or encouraging further offshore drilling, they 
say no. But when it comes to tax subsidies that benefit their bottom 
line, they say yes, yes, yes.
  I think what we have to do is press forward to ensure that these tax 
subsidies are revoked, and dedicate these tax subsidies to deficit 
reduction. In that way, we can let the market decide on the success or 
failure of these companies. That is one of the mantras I hear so often 
from many here, particularly from my colleagues on the other side of 
the aisle. I think it can be done without in any way impacting the cost 
of fuel in the United States.
  I think, frankly, what we are seeing--going back to my initial 
point--is that there are factors beyond tax subsidies that are driving 
up the cost of fuel: speculation; issues of the international exchange; 
the value of the dollar. But it is quite clear, given our dependency--
and we have to get off that dependency on oil--that there will be a 
robust market for petroleum products in this country for the 
foreseeable future. That market alone justifies increased exploration, 
research, and other activity, and it will reward the companies. These 
subsidies are not necessary. Instead of wasting taxpayer money on 
subsidizing big oil profits, it is time we close these loopholes and 
return the savings to the American taxpayer. With that, I urge rapid 
support and favorable support of Senator Menendez's legislation.
  I yield the floor and suggest the absence of a quorum.
  The ACTING PRESIDENT pro tempore. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. DURBIN. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                          ____________________