Washington - As oil companies continue to report record second-quarter profits, Senate and House Democrats today demanded an end to billion-dollar tax breaks for Big Oil and demanded that the companies divert more resources into increased U.S. production and renewable energy instead of buying back their own stock.
Senate Democratic Conference Vice Chairman Charles Schumer, House Democratic Caucus Chairman Rahm Emanuel, Senator Robert Menendez of the Senate Energy and Natural Resources Committee, and Chairman Ed Markey of the House Select Committee on Energy Independence and Global Warming issued the demands in a letter to the five largest oil companies. The letter was unveiled at a news conference this morning after Exxon Mobil and Royal Dutch Shell announced eye-popping second-quarter profits.

Schumer said: "Inside the boardrooms at the major oil companies, it's Christmas in July. What's shocking is that Big Oil is plowing these profits into stock buybacks instead of increasing production or investing in alternative energy. Why do they need more land to drill on when all their money is going into buying up stock?"

Emanuel said: "Today's reports are good news for ExxonMobil and Shell shareholders, but bad news for the shareholders I represent - American taxpayers who are shelling out billions for handouts to big oil companies and then paying record prices at the pump. Companies that are spending billions on stock buybacks and making record profits don't need a taxpayer-funded handout."

Menendez said: "Since last week, we have seen a parade of astronomical, mind-boggling oil company profit reports and the Republican Party is right along with them and applauding all the way. But please forgive people on Main Street who pay $100 per fill-up, for watching this profit parade and wondering what all the cheering is about. We ask the question: why are our Republican colleagues fighting tooth and nail to aid and protect the oil companies when it's the American people who need us to fight for them? "

Markey said: "Exxon's profits are excessive, Shell's profits shellshock, and BP should be renamed Bloated Profits," said Rep. Edward J. Markey (D-Mass.), Chairman of the Select Committee on Energy Independence and Global Warming. "While the world is in energy crisis, these companies are making the greatest profits in the history of the world, and then have the gall to protect billions in tax breaks that should be going to renewable energy sources."

On Thursday, Exxon Mobil announced a second-quarter profit of $11.7 billion, setting a new quarterly profit record for a U.S. company. Royal Dutch Shell came in just behind Exxon Mobil at $11.6 billion. On Tuesday, BP announced a 28-percent rise in net profits. Last week, ConocoPhillips reported last week that its second-quarter profit rose 13 percent over adjusted results from one year ago. Chevron will make its profit announcement tomorrow.

While oil companies are earning record profits and gas prices are soaring, the companies have invested more resources in stock buybacks than U.S. production. The Associated Press reported that in the first quarter of 2008, Exxon Mobil spent $8.8 billion on stock buybacks and only $5.5 billion on exploration and capital projects.
Overall, between 2005 and 2007, Exxon spent almost 90 billion on stock repurchases. The five largest oil companies have ploughed a combined $194 billion into stock buybacks during that span. Those spending totals dwarf the companies' outlays on either increased U.S. production or development of renewable technologies, as shown in the table below.

OIL COMPANY EXPENDITURES - 2005-2007 (in millions)

Stock BuybacksU.S. ProductionResearch and DevelopmentExxonMobil$89,528$8,762$2,908Chevron$18,234$12,951$1,591ConocoPhillips$12,445$9,567$528BP$42,326$26,940$1,902Royal Dutch Shell$18,113$7,665$3,227

The lawmakers noted the variety of better uses for the $194 billion the companies have spent on stock buybacks. According to estimates, that sum could be used instead to give 2,000 rebates to every American family; create 2 million energy innovation jobs; build 5 million plug-in hybrid cars; and build 3.5 million solar-powered homes.

A copy of the letter to the oil companies appears below.

July 31, 2008

Mr. Tony Hayward
Chief Executive Officer
International Headquarters
1 St James's Square
London, SW1Y 4PD

Mr. David O'Reilly
Chief Executive Officer
6001 Bollinger Canyon Road
San Ramon, CA 94583, USA

Mr. James J. Mulva
Chairman and CEO
600 North Dairy Ashford (77079-1175)
P.O. Box 2197
Houston, Texas 77252-2197

Mr. Rex W. Tillerson
Chairman and CEO
5959 Las Colinas Boulevard
Irving, Texas, 75039-2298

Jeroen van der Veer
Chief Executive
Royal Dutch Shell
Royal Dutch Shell plc
Carel van Bylandtlaan 30
The Netherlands

Dear Gentlemen:

We are writing to express our concern that you have used much of your record profits in recent years to buy back your own stock to enrich the value of your share price, rather than invest in oil exploration or production here in the U.S. or in the research and development of alternative energy sources that are demanded by U.S. consumers.

From January 2004 to March 2008, your companies have reported spending over $194 billion in stock buybacks, which have had the impact of enriching shareholders and further shoring up executive compensation packages. Your combined five companies have reported spending only 30 percent of your stock buyback amount on U.S. oil exploration and production. This helps to explain why so many of the 68 million acres of federal leases that have the potential to produce an additional 5 million barrels of oil a day are currently stockpiled. From your filings, we find that only 5 percent of the amount that you have spent on stock buybacks was spent on various research and development expenditures which may not even include alternative energy research. This sheds light on why the U.S. has been unable to meaningfully diversify its energy sources, despite consumer demand for cheaper and cleaner alternatives.

We ask that you pledge to greatly increase the ratio of investments in production and alternatives to the amount of stock buybacks this year and next by investing much more of your profits into exploration and production on the leases you have been awarded in the U.S., and in the research and development of promising alternative energy sources. Given today's strong market incentive for expanding exploration and production, we can only believe that reinvesting your vast profits into the production of more oil and natural gas in the United States is a profitable strategy that will help our country increase its dependence on foreign oil. And given today's strong demand for fossil fuel alternatives, we can only conclude that meaningful investment in alternative energy research and development can enhance your brand's value here in the U.S. while helping America compete in the global energy innovation race.

We respectfully ask that you consider our pledge, and look forward to hearing from you on this matter.


Charles E. Schumer Rahm Emanuel
U.S. Senate U.S. House of Representatives

Robert Menendez Ed Markey
U.S. Senate U.S. House of Representatives

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