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House Dems Unveil Bill to Collect Past Offshore Royalties

House Democrats Tuesday introduced legislation that seeks to correct an omission in offshore oil and natural gas leases issued by the Interior Department in 1998-1999 that reportedly is costing the federal government billions of dollars.

The bill would fix the flaw that has allowed dozens of companies to produce oil and gas in the Gulf of Mexico without paying royalties to the federal government. The measure has a slim chance of passing Congress, given that past efforts by Democrats have failed (see Daily GPI, June 12, 2006). Republicans have tended to side with producers, who have argued that any attempt to renegotiate or revoke the leases would violate contract sanctity and would set a bad precedent.

The Minerals Management Service, the predecessor to the Bureau of Ocean Energy Management, Regulation and Enforcement, failed to include in the 1998-1999 leases oil and gas price ceilings, which when exceeded would make production from the leases royalty-bearing (see Daily GPI, Sept. 15, 2006). The Government Accountability Office has estimated that the error in the leases could cost the federal government up to $53 billion over the next couple of decades, according to the sponsors of the legislation.

The Democratic authors of the bill, "Deficit Reduction Through Fair Oil Royalties Act," are Reps. Edward Markey of Massachusetts, Rush Holt of New Jersey, George Miller of California, Jim Moran of Virginia, Maurice Hinchey of New York and Lois Capps of California.

"We should be ending this ridiculous loophole that robs the taxpayers of more than a billion dollars a year...Oil companies don't need a $53 billion windfall courtesy of American taxpayers that increases our national debt," Markey said.

"The country owns this land. The country deserves these royalties," Holt said.

"These hugely profitable companies are tapping oil and gas reserves that belong to the American people, selling it back to us and then reaping a massive profit on the backs of the middle class families. But the real kicker is that these oil companies are not paying one red cent to the public for the oil and gas they have extracted from publicly owned resources," Hinchey said.

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