Bloomberg News

Chevron Says U.S. Energy Policy Rife With Contradictions

October 19, 2011

(Updates with Watson comments on tax increases in eighth paragraph)

Oct. 19 (Bloomberg) -- U.S. energy policy is rife with contradictions and companies gain access to natural resources “by exception, not by rule,” Chevron Corp. Chairman and Chief Executive Officer John Watson said.

The U.S. needs to encourage production of oil and natural gas rather than limiting energy development, Watson said today in written remarks for a speech at the Peterson Institute for International Economics in Washington.

“No matter where you look in the world -- China and developing Asia, the Middle East, Latin America or Africa -- the development of affordable fossil fuels is at the top of the policy agenda,” he said. “Without a change in U.S. policy, we will continue to be marginalized in the global competition for energy.”

Chevron, based in San Ramon, California, joined oil companies such as Royal Dutch Shell Plc, trade associations led by the American Petroleum Institute and Texas Governor Rick Perry, a Republican presidential candidate, in criticizing President Barack Obama’s administration for limiting access to domestic fuel resources and increasing dependence on imports.

Watson said an estimated $1 billion investment to update Chevron’s refinery in Richmond, California, required four years of review and was halted by a lawsuit. Chevron is refiling for permits for the project near San Francisco, he said.

Shell’s Alaska Experience

Marvin Odum, the president of Shell’s U.S. operations, called the the U.S. regulatory system “reactionary” and overburdened in a July 28 speech at the U.S. Chamber of Commerce in Washington. He cited The Hague-based company’s experience in Alaska, where it hasn’t been allowed to drill after spending more than $2 billion in a 2008 purchase of federal leases.

Perry said in an Oct. 14 speech that Obama intentionally pushed up oil and gas prices, and the governor urged opening swaths of Alaska and additional areas to oil development.

The Obama administration proposal to increase taxes for the oil industry would reduce U.S. competitiveness for U.S. energy companies relative to their Chinese, Russian and Indian counterparts, Watson said.

He compared his California company with another: Apple Inc., based in Cupertino.

“Apple earns about what we earn, but Apple has profit margins two times Chevron’s, and an effective tax rate one-third less, about 28 percent,” Watson said today. “Yet we don’t hear calls for tax increases on Apple or the tech sector.”

Renewable Energy

The transformation from fossil fuels to renewable substitutes should be market-driven, Watson also said.

“The United States is now coming to grips with high-cost, subsidized renewable,” he said.

Solyndra LLC, a solar-panel manufacturer that received about $527 million in federal loan guarantees, shut down on Aug. 31.

Adam Fetcher, Interior Department spokesman, and Damien LaVera, a spokesman for the Energy Department, didn’t immediately return e-mails seeking comments.

Chevron is the second-largest U.S. oil company behind Exxon Mobil Corp. of Irving, Texas.

--Editors: Judy Pasternak, Bob Brennan

To contact the reporter on this story: Katarzyna Klimasinska in Washington at kklimasinska@bloomberg.net

To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net


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