Oil Exec Explains His Perspective Robert Siegel interviews Red Cavaney of ConocoPhilips about the congressional battle over tax breaks for the top oil companies.
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Oil Exec Explains His Perspective

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Oil Exec Explains His Perspective

Oil Exec Explains His Perspective

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For more now on the oil companies' views, we're joined by Red Cavaney. He's senior vice president for government affairs for ConocoPhillips. In other words, he's ConocoPhillips' head lobbyist. Welcome to the program.

Mr. RED CAVANEY (Senior Vice President for Government Affairs, ConocoPhillips): Robert, thank you very much.

SIEGEL: And as we've heard, there was a lot of talk from Senate Democrats today about a shared sacrifice. Does ConocoPhillips believe that it has any responsibility to share in a sacrifice at a time of economic trouble in the country?

Mr. CAVANEY: Well, I think we absolutely do. Our view is that we're all in this together. And our future's dependent upon a competitive, growing American economy. And so we want to help do what we can to help create U.S. jobs and make ourselves competitive so we can out and sell our products abroad, as well as import the products we need here in the country.

SIEGEL: But the issue here is tax breaks and ConocoPhillips' reported profits in the first quarter of this year were 43 percent higher than the same quarter last year. I believe since 2000, the annual growth rate of earnings, the annual rate has been a seven percent or eight percent almost increase. It doesn't feel like we're on the same boat. You guys are in a much fancier boat than the rest of us.

Mr. CAVANEY: Well, we're not in a fancier boat in the sense if you take a look at the risks that we have and the massive investments that we have to make in order to produce the crude oil and natural gas that the public demands. Oftentimes, we'll obtain leases from the government. We'll have to work on those for four or five and sometimes even seven years before we get any first production off of that. So there's a great deal of cost involved and a great deal of lead time.

SIEGEL: But when you said you take great risks, let me put to you what Senator Jay Rockefeller of West Virginia, a man with some connection to the history of oil and oil profits in this country. He said you never lose, that the oil companies win every single year, no matter what happens. When was the last time that ConocoPhillips had a losing year without a profit?

Mr. CAVANEY: Well, I think we, like many companies, had a very, very difficult year in 2008 and in 2009. Those were very challenging years for us, in terms of losing money, if that's what he meant. It wasn't quite clear what he meant by a losing year. But, you know, we go through - our industry is like most commodity industries, very cyclical.

You might recall back in 2008 where one day a barrel of crude oil cost $147 a barrel. And it wasn't very long thereafter that it was back down below 50.

SIEGEL: But when it went back down to 50, ConocoPhillips, I'm not singling you out, but the oil companies in general didn't see their earnings drop by 50 percent, did they?

Mr. CAVANEY: I don't have the data to speak to that, Robert. I'll be glad to follow up after the call, though.

SIEGEL: How do you react to the criticisms that the oil company CEOs were hearing from Democrats on the Finance Committee who were saying, look, we've got a Republican budget proposal that's been tabled that would cut the federal government in half? We're about to seriously revisit Medicare, Medicaid, student loans, you name it, and everybody's got to kick in here. Everybody's got to do something that they don't necessarily want to do.

And for you guys, since the oil companies are phenomenally profitable, for you guys it means paying more taxes.

Mr. CAVANEY: Well, yes, first of all, phenomenally profitable - if you take a look at the profit, in other words, the amount of money that you've made as income off the amount of sales, we're at about the medium. There are companies and industry groups that make two and three times the amount of profit that we do on their sales.

So we're large in size, yes. Our numbers are big, but our percents are small. But we still feel that we would be interested in (unintelligible), and obviously, we're part of the country, and as I mentioned earlier, we benefit when the economy's doing well. So we recognize...

SIEGEL: I think your stockholders get 16.6 percent return on share price.

Mr. CAVANEY: And our stockholders are average men and women on the street.

SIEGEL: Pretty good.

Mr. CAVANEY: And people who are pensioners and people who have invested in 401Ks. So it's a cross-section of America. And if we can return something to them that shows that their investment was worth doing, that's good for everybody, including the country and the government because they collect tax revenue off that.

SIEGEL: Mr. Cavaney, thank you very much for talking with us.

Mr. CAVANEY: Thank you.

SIEGEL: Red Cavaney, who is senior vice president of government affairs for ConocoPhillips.

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