At Taxpayers for Common Sense, we recently analyzed the federal income taxes paid over the last five years by some of the largest U.S.-based oil and gas companies. What we found surprised us.

We set out to document the federal tax rate of oil and gas industry leaders because we knew the claim made by the American Petroleum Institute – that the industry pays an income tax rate of 44.3 percent – is misleading. The claim is misleading because the institute uses it in the context of reforming the federal tax code, but the figure includes all foreign, state and local taxes, as well as federal. When we looked at the financial statements of 20 of the largest oil and gas companies, we found this group paid an average federal tax rate of 24 percent on its U.S. income.

This was not surprising. It is no secret the federal tax code is riddled with broad exceptions and deductions allowing many industries to pay much less than the standard 35 percent corporate rate. In fact, one of the goals of tax reform is to lower the overall corporate rate by removing the system of distortive tax preferences that require companies to change their behavior in order to qualify.

What was surprising, though, was the extent to which these companies were able to delay or defer the payment of the federal taxes they accrued. Most of the companies in our study deferred more than they actually paid. When the deferred taxes are subtracted from the amount these 20 companies owe, their average “current” tax rate drops to 11.7 percent. The independent oil and gas companies in the bottom half of our list, excluding the ones that recorded losses for the period, deferred almost all of the federal income taxes they accrued during the last five years, reporting an average current tax rate of just 3.7 percent.

While there are a number of reasons a company may defer tax payments, the companies in our study reported their deferral was almost entirely from “plant, property and equipment.” These companies have spent more in recent years on tangible property (e.g. constructing drilling rigs), and have been able to deduct more from their taxable income as a result, dramatically lowering their federal tax bills. It’s worth noting too, that while the industry champions its investments as job creating, the taxpayers are, at the end of the day, lowering the companies’ cost of capital to make those investments. Deferral of taxes functions a lot like interest free loans – companies that get to defer taxes simply choose to use that money for something other than paying that tax obligation, instead putting the obligation off into the future. And, in turn, that deferral increases the size and cost of the federal debt.

The industry and its supporters see this as a causal relationship between tax breaks and the oil industry’s decision of whether or not to invest in domestic oil production. Remove these favorable tax provisions, the argument goes, and these companies will move their business, and jobs, abroad. There are at least a couple of problems with this argument.

First, prices and technology drive production decisions. The single biggest factor effecting the decisions of oil companies is the price of oil, which is determined by the world market. Oil prices remaining above $100 per barrel creates the incentive to drill. Coupled with this is the affordability of technology that allows companies to extract oil and gas from previously unattainable sources, like shale. This is what is driving domestic oil and gas production in recent years, not century-old tax breaks.

Moreover, oil and gas companies don’t need government subsidies. Just the 20 companies in our study reported in excess of $175 billion in total deferred tax liabilities at the end of 2013. They do not pay any interest to the government on this amount, even if it takes 20 years to pay it. The oil and gas industry is one of the most profitable in the world – the five largest oil and gas companies reported more than $104 billion in profits last year – so it does not need special treatment in the tax code.

A common refrain is that U.S. corporate taxes are the highest in the world, which is bad for our economy. One of the biggest roadblocks to reducing our corporate tax rate is resistance from powerful industries, like the oil gas industry, which get a special deal better than other corporate taxpayers because of a list of tax benefits, many unique to their industry. The oil and gas industry maintained their special deal even through the 1986 reform of the tax code, the last time it was overhauled. Let’s hope when Congress gets to comprehensive reform this time these outdated, special breaks for the profitable oil and gas industry are left on the chopping block.