SUMMARY OF PRINCIPAL POINTS IN STATEMENT OF ROBERT G. DUNLOP 1. The United States economy is heavily dependent upon petroleum energy; oil and gas today provide nearly three-fourths of all energy consumed in this country. 2. Assured supplies of petroleum are vital to the national security of the United States. 3. 4. With present tax incentives, the domestic petroleum industry has met this country's essential petroleum needs. Present tax and other incentives have enabled the industry to develop a reserve producing capacity amounting to 3,000,000 barrels daily in 1968. Similarly, the United States today has a spare producing 5. capacity facilities 6. 7. 8. 9. - of 1,000,000 barrels daily, which is available Since it is based on production, the depletion provision is Existing tax incentives have contributed significantly to Tax incentives have contributed to the conservation of 10. 11. 12. 13. 14. 15. The petroleum industry earns only average profits on invest ment. The petroleum industry carries an overall tax burden equivalent The combination of sharply rising costs and modestly rising Increased taxes would likely result either in higher petroleum Complete elimination of tax incentives would make the United States heavily dependent on foreign oil; that dependency would range up to 48 to 58 per cent of supplies. 16. This dependency could very well involve this country in a 17. stability in the area. Contrary to popular notions today, the United States is not running out of oil. Neither is it indicated that Alaska will produce enough additional oil to meet our future needs. STATEMENT OF ROBERT G. DUNLOP, PRESIDENT SUN OIL COMPANY BEFORE THE COMMITTEE ON FINANCE I am Robert G. Dunlop, president of Sun Oil Company, Philadelphia, Pa. My appearance today is on behalf of the American Petroleum Institute, the Mid-Continent Oil and Gas Association, the Rocky Mountain Oil and Gas Association and the Western Oil and Gas Association. I will attempt to give you an over-view of the present petroleum situation in the United States and of the likely impact of proposed tax changes on that situation. Appearing with me are Mr. William Spencer, executive vice president of the First National City Bank of New York, who will discuss future petroleum requirements and capital investment needs; Mr. George V. Myers, executive vice president, Standard Oil Company (Indiana), who will evaluate the impact of the proposed tax changes on domestic operations; and Mr. Emilio G. Collado, executive vice president of Standard Oil Company (New Jersey) who will close our presentation with a discussion of the tax treatment of foreign petroleum operations. My colleagues and I appreciate this opportunity to present the petroleum industry's views on proposed tax changes for oil and natural gas. We feel strongly that this Committee's decisions on petroleum tax policies will significantly affect the Nation's future economic progress and its security. 33-758 - 69 No. 15 - 4 Accordingly, we feel that it is vitally important that the Committee's decisions be based on a comprehensive review of the effect of the proposed changes on our Nation and all of its citizens. It is our intent to contribute to this review by providing you with pertinent background information on the present petroleum situation and how it would be affected by the tax changes now under consideration. In providing an over-view, I will attempt to define the role of tax incentives in the Nation's petroleum progress; to place the industry's tax payments, prices and profits into perspective; to discuss the relevance of petroleum tax policy to national security; to describe the present status of the industry; and to look at the impact of the tax proposals on the United States petroleum supply position. First, however, I would like to state the industry's basic position on proposed changes in tax policy. It is this. Our experience as oil men demonstrates that tax incentives provided by the Congress in present law have very effectively achieved the purpose for which they were created: to provide an incentive for development of our petroleum resources. our resources have, in fact, been effectively developed is a matter of record a record of which we in the industry are indeed proud. That We observe two kinds of pressure being applied for a reduction in petroleum tax incentives. One is the pressure of emotional argument for boosting taxes on oil companies, come what may. The second is a more reasoned approach, recognizing the need for incentives but questioning whether the present level is necessary. The facts of the situation appear to be of little interest to those who have been advancing the emotional arguments. But we are hopeful that the facts will be of paramount importance to those who are sincerely interested in reaching tax policy decisions that will be in the long-run besť interests of the people of the United States. We seek to be open-minded. We are not blindly opposed to change. If petroleum tax policy changes can be demonstrated to be in the best interests of the American public, we will surely not oppose them. But we strongly oppose change based on emotion rather than reason change which is inimical to - the progress of this Nation and to its security. Petroleum Energy in the United States Against that background, I want first to look with you at the role of petroleum energy in the United States today. I submit that it would not be overstating the case to say that petroleum is the virtual lifeblood of this country. "The importance of petroleum to the national |