By Jay Heflin - 07/12/10 03:09 PM EDT
"People associated with the oil and gas industry often argue that the tax breaks they enjoy encourage them to locate and extract more oil and gas, which allows them to increase supply and thus keep energy prices below the level they would otherwise reach," the report states. "But among the largest five oil companies, less than 10 percent of profits goes to exploration for new oil fields. High profits do not encourage exploration."
Levin looks to pay for a green energy jobs bill by repealing oil and gas tax breaks. But some lawmakers are pushing back against his offsets, contending their repeal will hurt oil and gas exploration efforts.
The CTJ report states that profits and exploration do not necessarily go hand-in-hand.
It found the top five oil companies direct most of their excess cash to dividends and stock repurchases, not oil exploration. Plowing money into these area drives up a company's share price and executives' stock option values, the report states.
The percentage of net profits going toward dividends and stock repurchases has also increased among these firms over the years. In 2005, 58 percent of profits went to these areas. That percentage jumped to 89 percent in 2009.
"To the extent that tax loopholes targeting the oil and gas industry boost their profits, there is no evidence that the additional profits lead the companies to explore for more oil so that they can increase the supply," the report states. "Nor does the current tax treatment of oil and gas companies encourage them to develop alternative energy.
"These companies always claim to be interested in alternative energy, but they actually invest very little in it," the report states.
Reviews of oil company press releases, SEC filing and published articles suggest alternative energy investments approximate less than 5 percent of profits for the top five firms, the report states.
It also states that Shell Oil announced in 2009 it was reducing alternative investments because conventional operations provided higher returns.
"American taxpayers have subsidized the fossil fuel industry through the tax code for decades," the report states. "The taxpayers have received nothing in return. The United States has grown no closer to being independent of foreign oil imports, even as domestic drilling practices threaten our environment here in the U.S."