The Houston Chronicle (Texas)

On a day when energy companies Royal Dutch Shell and Exxon Mobil Corp. announced multibillion-dollar quarterly profits, politicians and consumer rights activists called on the industry to explain high prices and build new refineries.

At least two energy companies — Marathon Oil Corp. and Shell — addressed the refinery issue in their earnings released Thursday.

Marathon, which tripled its third-quarter profit to $770 million on $17 billion in sales, announced it will spend $2.2 billion to expand its Garyville, La., plant, boosting capacity by more than 70 percent to process 425,000 barrels of crude a day. That expansion will not be done until the end of 2009.

And Shell confirmed its Motiva partnership with Saudi Aramco is considering a Gulf Coast refinery expansion of 300,000 barrels per day.

It reported $9 billion in earnings on revenues of $95 billion, a 68 percent increase in profit over the third quarter of 2004.

Exxon Mobil, which earned $10 billion on revenue of $100 billion in the third quarter, has said in the past it has no plans for big refining projects in the U.S. It has pushed existing facilities to churn out more petroleum products and be more efficient over the years, with the net effect being that of adding new refineries to its system.

No new refineries have been built in the United States in decades. The industry frequently cites environmental restrictions and neighborhood oppositions as the primary reasons that development has been at a standstill.

Jamie Court, president of The Foundation for Taxpayer and Consumer Rights, issued a written statement Thursday calling on the government to force ExxonMobil to invest in new refineries.

“The proof of price gouging is in the profit reports. Exxon knows that by making less gasoline it makes more money — now Exxon needs to invest that money in making more gasoline,” he said.

In the wake of this week’s earnings announcements, Senate Majority Leader Bill Frist on Thursday ordered a hearing with testimony from major oil company executives about why energy prices are high.

“If there are those who abuse the free enterprise system to advantage themselves and their businesses at the expense of all Americans, they ought to be exposed, and they ought to be ashamed,” the Senate’s top Republican said in a written statement.

Frist also asked the Senate’s permanent subcommittee on investigations to launch a separate inquiry into energy price profiteering.

“And ultimately, if the facts warrant it, I will support a federal anti-price gouging law,” Frist said.

Several politicians have recently introduced bills calling for taxes of “windfall profits” — a term coined in the 1970s when energy prices spiked, hitting consumers’ pocketbooks and companies’ bottom lines.

Those proposals, which are in committee, seek to levy taxes on energy companies. What to do with the money is a topic of hot debate.

Two proposals include House Bill 3752, which seeks to to use energy company profits to reduce taxes levied at gas pumps, and Senate Bill 1809, which would use profits to finance a Hurricane Katrina victim relief fund.

During ExxonMobil’s conference call on earnings this morning, one analyst asked Henry Hubble, vice president of investor relations, about the windfall profit tax plans that are being bandied about in Washington, D.C.

“If you look at the current issues facing the industry, a lot of this is in response to a tightness of supply,” Hubble said. “If you’re trying to encourage supply growth, it seems odd to put in place disincentives. We think the best approach is to let the markets work. That’s proven to be the most effective way to respond to these things in the past.”

In a recent investors note, Deutsche Bank analyst Paul Sankey said the White House could be close to recommending regional reserves for gasoline, diesel and jet fuel, which would cost the industry between $ 100 million and $ 500 million a year, and a tax on the oil industry to flesh out the Low Income Home Energy Assistance Program.

“Only $ 2 billion of the desired $ 5.1 billion program has been met — the industry would cover the shortfall,” Sankey wrote. Those proposals would amount to shaving off about 5 percent profits across the industry, but Sankey argues it could be a good move for energy companies because they could look like they are making a sacrifice while actually passing costs to consumers.

“They would reduce pressure for a more severe and troublesome windfall profit tax,” Sankey said. “Costs will be passed through if it is industrywide. Against some of the wilder ideas out there, this may be a relatively small price to pay.”