Elmer Smith: It's time these drilling tax breaks went the way of the dinosaur

CEOs James Mulva (left) and Rex Tillerson argued for subsidies.
CEOs James Mulva (left) and Rex Tillerson argued for subsidies. (Associated Press)
Posted: May 13, 2011

ABOUT 300 million years ago, as closely as we can reckon, sea algae and giant ferns died and began to be pressure-cooked beneath the Earth's surface.

Some 150 million years later in the Cretaceous period, reptiles the size of construction cranes started dropping like flies, and their decaying carcasses were added to this primordial ooze.

Today, their refined remains are going for $4 a gallon, assuring dinosaur-size profits for an industry that has grown bloated on this Paleozoic windfall.

They are entitled to their profits. Not everybody can do explorations to find the best oil and gas deposits, then drill a thousand feet deep to bring it up.

But what chafed me yesterday, as I followed the Senate Finance Committee hearings, was listening to industry CEOs and their elected apologists argue that these behemoths can't afford to explore and drill in America without their $4.4 billion a year in tax breaks.

One of those breaks targeted in New Jersey Sen. Robert Menendez's bill goes back to 1913, when government felt our oil industry needed a leg up in international trade. The industry will save $12.5 billion over the next 10 years from that ancient gift.

The most recent tax break is the domestic manufacturing deduction of 2004, which allows Big Oil to deduct from its taxable income 6 percent from oil it "manufactures" in America. That's worth $18.5 billion over 10 years.

These companies are swimming in profits. The big five who were questioned in Washington yesterday booked $36 billion in profits just for the past quarter.

Yet, ExxonMobil CEO Rex Tillerson whined that taking away subsidies would mean fewer explorations and less production, leading to higher prices at the pump.

This was curious. First they tell us they can't control an international market that sets oil prices. So why would losing a tax break that adds about 2 percent to their annual profits have an instant impact on pump prices?

Hey, I'm glad to see someone making money. I hope they pack it in faster than they can spend it.

But at a time when everybody from schoolchildren to the aged and infirm are kicking in to shore up a shaky economy, is it too much to ask this industry to break off a little something for the cause?

It is, to hear ConocoPhillips CEO James Mulva tell it. His company's news release said that it would be "un-American" to take back these subsidies.

I've got his un-American right here. It's un-American for a guy like Mulva, who made $50 million last year, to claim that losing $4 billion a year in tax breaks would hurt his industry more than it helps his country. It's un-American to retain a subsidy that was meant to give U.S. firms an advantage in an international market when those same companies now dominate it.

And here's a flash for the big five: You don't explore and drill in America because your pliant toadies in Congress have created a favorable business climate here.

You explore and drill in America because dinosaurs died here. You look for oil and gas where it can be found. You will do that whether we subsidize you or not.

There was an oil industry here even before 1859, when a guy named Drake first struck oil in Titusville, Pa. They squeezed lamp fuel from whale hides in those days, and they didn't need a subsidy to do it.

The industry will drill frozen tundra in Siberia and stretch pipelines across Central Asia and Eastern Europe to the Caspian Sea and do deals with every diamond-studded mullah in the Middle East to exploit this business, with or without American subsidies.

Somebody should tell Gov. Corbett that the firms exploiting the Marcellus Shale fields will be here whether he shields them from taxes or not.

They're here for the same reason that Willie Sutton robbed banks: It's where the money is.

Been that way for a few million years - with or without subsidies.

Send email to smithel@phillynews.com or call 215-854-2512. For recent columns: www.philly.com/ElmerSmith

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