By Joe Carroll
(Bloomberg) -- Exxon Mobil Corp., Chevron Corp. and ConocoPhillips, the largest U.S. oil companies, will ask lawmakers not to punish them for the human and environmental damage inflicted by BP Plc’s oil spill in the Gulf of Mexico.
Exxon Chief Executive Officer Rex Tillerson, Chevron CEO John Watson and James Mulva, CEO of ConocoPhillips, are scheduled to appear tomorrow before a House Energy and Commerce Committee panel examining offshore drilling safety and U.S. energy policy.
The hearing presents the U.S. oil CEOs with an opportunity to distance their companies from BP, said Anthony Sabino, who teaches oil and natural-gas law at St. John’s University in New York. BP has lost 43 percent of its market value since the disaster and has been excoriated by President Barack Obama for repeated failures to cap the leaking well.
“A crucifixion of the whole oil industry for the sins of BP in the form of a ban on deep-water drilling isn’t a good idea because look at all the people it’s going to put out of work,” Sabino said. “Exxon and ConocoPhillips will stress their own safety records to make that case.”
Since an April 20 explosion aboard the Deepwater Horizon drilling rig that killed 11 workers, more than 50 million gallons of crude have poured into the Gulf from a BP-owned well, based on calculations from a government panel.
Obama Meeting
The U.S. government has intensified pressure on BP to stop the spill and pay for damages. Obama has asked to meet June 16 with BP’s chairman, Carl-Henric Svanberg, and other company officials. BP Chief Executive Officer Tony Hayward will appear before the House Energy and Commerce oversight committee the following day.
The oil company CEOs have been asked to testify tomorrow about the spill’s effect on U.S. energy policy, Eben Burnham- Snyder, a spokesman for Representative Edward Markey, said June 9. Markey is a Massachusetts Democrat and chairman of the subcommittee holding the hearing.
The executives may also be pressed to explain dividend payouts and share buyback programs that have dwarfed their investments in alternatives to petroleum, such as solar and wind, according to a June 12 memorandum written by Congressional staff and distributed to lawmakers who will participate in tomorrow’s hearing.
Executive Pleas
Tillerson, Watson and Mulva probably will ask lawmakers to avoid changes in offshore drilling rules that could discourage exploration in U.S. territorial waters without making meaningful contributions to safety, said Gianna Bern, president of Brookshire Advisory & Research Inc. in Flossmoor, Illinois, which advises oil companies on strategy and risk management.
Tillerson will urge lawmakers to wait until an investigation has determined the cause of the catastrophe before deciding on changes to offshore drilling rules, Alan Jeffers, a spokesman for the Irving, Texas-based company, said in a telephone interview yesterday.
Kurt Glaubitz, a spokesman for Chevron, based in San Ramon, California, said he couldn’t immediately comment. Nancy Turner, a spokeswoman for Houston-based ConocoPhillips, said in an e- mail that the company wouldn’t release Mulva’s prepared remarks.
More than 30 deep-water rigs have been ordered to cease drilling off the coasts of Louisiana and Texas for at least six months while federal officials conduct a review of offshore safety practices. The Gulf accounts for 30 percent of U.S. oil production, according to the Energy Information Administration.
Drilling Pause
The drilling halt may cut oil production in the Gulf by as much as 11 percent next year, said Paul Cheng, a Barclays Capital analyst.
“These executives need to explain to the politicians that if you permanently shut us down in the deep water it’s going to wreak havoc with energy production and put the United States even more at the mercy of foreign oil producers,” Sabino said.
Also scheduled to appear before tomorrow’s panel are Lamar McKay and Marvin Odum, the presidents of the U.S. units of BP and Royal Dutch Shell Plc, respectively.
Lawmakers may ask Exxon, Chevron, ConocoPhillips and Shell to describe safety measures they have used offshore to avoid the sort of disaster BP faced, said Bern, a former BP crude trader.
Exxon, which pumps more crude than every member of OPEC except Saudi Arabia, Iran and Iraq, abandoned an exploration project known as Blackbeard in the Gulf of Mexico in 2007 rather than risk a blowout. The company quit the project, which sought to drill more than six miles (9.7 kilometers) beneath the seafloor, after repeated pressure surges indicated the well was unstable.
Controlling Macondo
BP engineers alerted federal regulators at the Minerals Management Service that they were having difficulty controlling the Macondo well six weeks before the disaster, according to e- mails released by the Energy and Commerce Committee.
“I don’t think this would have happened on Exxon’s watch,” Tom Bower, author of “The Squeeze: Oil, Money and Greed in the 21st Century,” said in a June 11 Bloomberg Television interview. “They’d be much more careful and much more conscious of the need to supervise subcontractors.”
--With assistance from Maryam Nemazee in London. Editors: Susan Warren, Tina Davis
To contact the reporter on this story: Joe Carroll in Washington at jcarroll8@bloomberg.net.
To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net
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