Interviews

Chevron CEO: We Pay Our Fair Share in Taxes

This is a rush transcript from "Your World" May 12, 2011. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST OF “YOUR WORLD”: Well, talk about your dog-and-pony shows. At least someone had the good sense to bring a picture of a dog and pony, because, when it comes to parading out oil CEOs today to rip them over their tax subsidies, more than a few senators barking like asses.

(BEGIN VIDEO CLIP)

SEN. CHARLES SCHUMER, D-N.Y.: Do you think anyone who advocates cutting these subsidies is un-American? Yes or no?

JAMES MULVA, CHAIRMAN AND CEO, CONOCOPHILLIPS: Well...

SCHUMER: Yes or no, sir.

UNIDENTIFIED MALE: Are you willing to apologize for what your company...

(CROSSTALK)

MULVA: Senator, what I just said, there was nothing intended personally.

(CROSSTALK)

UNIDENTIFIED MALE: So you’re not willing to apologize?

UNIDENTIFIED MALE: And what we have to offer -- what we have to offer, Senator...

(CROSSTALK)

UNIDENTIFIED MALE: ... lovely statement, but do you understand how out-of-touch that is?

(END VIDEO CLIP)

CAVUTO: It seemed to go well today.

One of those CEOs fires back, because the Chevron boss is here, and only here.

Welcome, everybody. I’m Neil Cavuto.

And, today, the only surprise was what took so long after that long pain at the pump, big oil back in the hot seat, forced to defend big tax breaks, getting more than a few senators hot under the collar.

To the guy at the center of this oil storm, Chevron CEO John Watson. He was among the CEOs getting grilled today.

John, I was watching a little bit. You guys weren’t given much of a chance to say anything today.

JOHN WATSON, CHAIRMAN AND CEO, CHEVRON CORPORATION: Well, Neil thanks for having me on the show.

There were some theatrics today, but it’s a serious topic. And, so, I was pleased to be able to share some pretty basic messages with Senate members. I told them that we pay our fair share of taxes. I told them that the tax treatment we receive is conquerable, in terms of deductions and credits, to the treatment received by other companies, and all we want is to be treated fairly and equitably, relative to other companies in our industry, both in the United States and abroad, and relative to other industries.

CAVUTO: Did you feel that you were just part of a kangaroo court, though, that -- I noticed a lot of times, not only could you guys not get out an answer, but that they were more interested in making speeches.

WATSON: Well, we take the opportunity we get. Sometimes, the comments have to be short. But we try to get our points across. And I think, on balance, we were able to get across a number of key points.

I think one of the things that I tried to share with Senate members is that, rather than talking about shared sacrifice, we ought to talk about shared prosperity, and the opportunity that our industry has to create jobs, create tax revenue for and -- and ultimately put more supply on the market to keep prices down for consumers. So, I think we got those points across today.

CAVUTO: Do you think, if you guys weren’t making so much money, and you’re making a lot of money, there would even be a hearing today?

WATSON: Well, our business is big. And I think that’s -- that’s hard for anyone to understand. When they see billions of dollars in earnings and zeros after numbers, it’s very hard to understand.

But our business is very big. And while our earnings are high in dollar terms, so is our spending. We’re spending $26 billion this year to try to find more oil and gas around the world and bring it to our customers in the United States and elsewhere.

And so the scope and scale of our business sometimes is -- is understandably hard for people to understand. It’s a big business.

CAVUTO: All right. I guess what a lot of these guys are asking, then, making all that money, you certainly don’t need any tax breaks; you don’t need any tax subsidies to hunt for that oil. What do you think?

WATSON: Well, what we need is tax treatment that’s comparable to what other companies receive.

Our -- our effective tax rate last year was 41 percent. And, so, we do pay considerable amount of taxes around the world. Chevron’s tax bill last year was about $13 billion. And we pay royalties and other fees on top of that. So, we pay our fair share. And that was the message I tried to get across.

CAVUTO: One message lost is the fact that you have support from the oddest of circles, including unions. I want to pass along a division of the AFL-CIO co-signing a letter with the American Petroleum Institute. You don’t see them together that often.

And it reads in part: "We are concerned certain proposals being considered to raise taxes on the oil and natural gas industry could endanger jobs."

What do you think of that, John?

WATSON: Well, I think organized labor understands what we do, and that is that we create jobs, and we create good-paying jobs in our business, at our refineries and in our producing operations in the Gulf of Mexico and onshore in this country.

And we can do more of that. Do you know if we opened more areas for leasing, if we were able to get permits for all the activity that we’d like to be able to conduct, we can create more jobs, and it’s good for labor, it’s good for taxpayers, and it’s good for the American public.

CAVUTO: What about the Menendezes and others -- I’m talking about New Jersey Senator Menendez, who have argued, look, you have got a lot of lands and areas that you hold that you’re not drilling, and if you were so hot to trot to drill and find oil, you’d tap those puppies, and you’re not. What do you say?

WATSON: Well, it doesn’t -- that -- that argument about use it or lose it doesn’t stand up to scrutiny. First off, we have use it or lose it today.

And one example I would give you would be in the Gulf of Mexico. We decided to invest $7.5 billion in a discovery that we made that was first leased in 1999, but the water was deep. We had to develop technology. We had to find the oil to begin with through seismic work and drilling. And that oil won’t produce until 2014.

So, it takes time for all of that to take place. And during that time, that’s counted as -- as unproductive acreage. And so I think there’s a great deal of misinformation and misunderstanding on that topic.

CAVUTO: Could I ask you maybe a bit of a simplistic question, but if you had a choice, maybe a Faustian choice, but a choice, the tax credits or we’ll let you drill to your heart’s content, which would you pick?

WATSON: I don’t think it’s an either/or choice. We’re asking for equitable tax treatment, and then we’d like to drill, and drill responsibly, both onshore and offshore.

CAVUTO: But they’re not letting you drill. The fact of the matter is, while the House approved drilling, the Senate never will likely, so we’re kind of at a standstill there, right?

WATSON: Well, we’re gradually getting back to work. In fact, we finally got a permit today in the Gulf of Mexico that we’ve been waiting on. We’re pleased to receive that permit to drill.

But we have other exploration plans that are slow in going through the regulatory process. We have another drill ship that’s headed to the United States. We want to put it to work here in the fall. And we need additional permits for more wells. And we hope we’ll see that process timely.

CAVUTO: Did any of you feel tempted to turn the questioning on the questioners, in other words, to say, we might not be in this energy pickle we’re in, Senator, if you just let us drill for more oil here. Did you ever feel tempted just to do that?

WATSON: Well, I think we made that point, that we -- we have an opportunity to drill more in this country.

The president talked about reducing energy import dependence. And it’s ironic that, so soon after the president laying out his plan, which requires more production in the United States, that we would see punitive tax measures put in place that will inhibit our ability to develop the very resources that we’re trying to produce in this country.

So, we think -- I think we got those points across. And that’s part of the reason I’m coming on your show today, is make that point to the American public.

CAVUTO: We’ve talked about this before, talking about the industry in general, that you guys do make a lot of money. I’m old enough, sadly, to remember a time when you didn’t make a lot of money, and the early ‘80s, where we had single-dollar oil, and a lot of guys were going out of business and merging and what have you.

We forget that. A lot of Americans forget that. Do you ever think that there’s a risk that could ever happen again, in other words, that this run-up in oil could easily run down, that it’s a bubble, that everything we’re experiencing now in gas and commodities is just a big old bubble that’s about to pop?

WATSON: Well, we do see volatility in the market. And we’ve seen that over the last several months. But I think the fundamentals around oil are here to stay.

What we’re seeing is that demand is rising around the world. We have a developed world that has enjoyed the benefits of oil and gas production for many years. But we have five billion people on this planet that are striving for the same things that we have, and their -- the light, heat, mobility, industrial development, and that’s going to consume more oil and gas.

And so we’re seeing demand rise, and we’re also seeing decline in mature -- in mature oil fields. And we’re going to need to continue to invest to keep up with that demand.

CAVUTO: But, John, what if it’s more than just a supply-and-demand thing?

I’ve had very respected business titans -- Jon Huntsman Sr. of Huntsman Chemical comes to mind -- who suspects that, you know, a lot of these speculators who trade this stuff and leverage this stuff and hedge this stuff are making a mess of this stuff. What do you say?

WATSON: Well, I think there clearly are more financial players in the market today, not just for oil, but for all goods and services and commodities today. We’re seeing gold at high levels. We’re seeing agricultural products at high levels. And...

CAVUTO: Unrealistic levels, in other words that go beyond supply and demand, beyond obvious explanations?

WATSON: I think, in some cases, you could make that argument. But I think, over time, these things even out. What they’re seeing is concern about inflation, concern about deficits in our future, concern about printing more money. And they’re going to safe havens, whether it’s gold or, in some cases, oil and other commodities.

CAVUTO: John Watson, a pleasure. Thank you very much.

WATSON: Thanks for having me, Neil.

CAVUTO: The Chevron chairman and CEO, John Watson, in Washington, one of the featured speakers today.

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