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Cardin, Gansler team up to make point vs. Big Oil

Ben Mook//Daily Record Business Writer//May 16, 2011

Cardin, Gansler team up to make point vs. Big Oil

By Ben Mook

//Daily Record Business Writer

//May 16, 2011

U.S. Sen. Benjamin L. Cardin and Maryland Attorney General Douglas F. Gansler teamed up Monday to try and bring down the runaway cost of gasoline in the state.

Cardin, D-Md., called for an end to federal subsidies that amount to $4 billion a year for big oil companies, while Gansler advocated state legislation that would allow for price gouging investigations.

Cardin and Gansler held a news conference on Monday at Harbor Shell, a service station on a busy stretch of Russell Street in Baltimore, to address concerns and complaints from consumers about the cost of gasoline. The price of a gallon of regular unleaded gas at the Shell station on Monday was $4.09.

“The people of Maryland are outraged by what’s happening at the gas pumps,” Cardin said.

Watch video from Cardin and Gansler’s press conference

The pair criticized oil companies and petroleum distributors as the forces behind the spike in gasoline prices. Both said that while gas station owners normally bear brunt of anger from consumers, they are actually at the mercy of those supplying them with fuel when it comes to pricing.

“They are hurting,” Cardin said of the service station owners. “They are working on small margins and they’re on the front line of the anger of our constituents.”

To put responsibility on the oil industry, Cardin and other legislators are calling for an end to federal subsidies going to the big oil companies through passage of the “Close Big Oil Tax Loophole Act.” The Senate Finance Committee would repeal tax subsidies to Exxon Mobil, BP, Shell, Chevron and Conoco Phillips.

Cardin said removing the subsidies would not lower gas prices, but would end taxpayer money going to companies that can obviously compete effectively without it. He said the companies have been seeing record profits and do not need subsidies to succeed. The bill is scheduled for a vote this week.

“I think this is kind of low-hanging fruit,” Cardin said. “You can’t justify these tax breaks.”

Republicans and a handful of oil state Democrats like Mary Landrieu of Louisiana are expected to filibuster the bill to death.

Gansler said the five largest oil companies together reported more than $35 billion in profits for the first three months of 2011. At the same time, he said, they were taking federal subsidies.

“That is real chutzpah,” Gansler said.

Cardin said removing the subsidies would not lead to an increase in gas prices. He called assertions by opponents of the bill that its passage would raise gas prices nothing more than “scare tactics” used by distributors and oil companies.

“Nothing could be further from the truth,” he said.

Cardin said the roughly $4 billion per year the subsidies amount to would be better served going to balance the federal budget. He said the subsidies were not being used to make the companies run more efficiently or to find new oil sources.

“The overwhelming majority of this money goes to the shareholders,” Cardin said. “It’s not being used to explore or bring down the cost of gasoline.”

Industry executives said eliminating the tax breaks would reduce investment in the U.S. Rex Tillerson, CEO of Irving, Texas-based Exxon Mobil, said the tax proposal “would discourage future investment in energy projects in the United States and therefore undercut job creation and economic growth.” He said it would do nothing to reduce gasoline prices.

The 41 U.S. oil and gas companies that break out their federal taxes said they paid Uncle Sam $5.7 billion in 2010, according to data compiled by Compustat. That’s more than any other industry. Exxon alone paid $1.3 billion. (The company’s total tax bill was $21.5 billion, but most of that was paid to foreign governments and states.)

Gansler’s office has started a probe into the increase in gas prices after a one-day, 25-cent per gallon increase in gas prices happened last Wednesday. Gansler said his office received complaints about the price hike and focused on one company in particular — Empire Petroleum Holdings — that had a “common thread” of being the fuel distributor to many of the stations complained about.

Gansler said his office, lacking an anti-price gouging statute, had to pursue the investigation as a potential consumer protection violation. He said he sent a letter to the company asking about the increase, and Empire blamed the hike on flooding in the Midwest, which he said seemed an unlikely factor on such a large jump in price.

Gansler said Monday that the day after he questioned Empire about the cause increase, prices went down 13 cents per gallon.

“It’s inexplicable,” he said.

Privately held Empire Petroleum Holdings is based in Rockville and distributes brands including Sunoco, BP, Chevron, Texaco, Valero, Gulf and Getty/Lukoil. The company distributes to stations in 12 states.

Empire executives did not return repeated attempts to reach them for comment.

The Associated Press contributed to this article.

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