Rep. Edward Markey (D-MA), a strong proponent of ending liberal royalty relief for producers, assailed the Bush administration Wednesday for not being tough enough with producers to resolve the debacle over royalty-free deepwater oil and natural gas leases.
The Bush administration “is patting itself on the back for getting a fraction of the companies still holding active [royalty-free] leases to voluntarily talk about paying their fair share, when it should be forcing all of these big oil companies back to the negotiating table,” said Markey, who as a senior member of the House Resources and Energy and Commerce Committees has tracked the contentious royalty issue closely over the past months.
Markey’s comments came after Minerals Management Service (MMS) Director R.J. “Johnnie” disclosed Tuesday that about a dozen oil and gas producers have voluntarily agreed to pay higher royalties on deepwater production in an effort to quell the rage on Capitol Hill over the royalty-free leases that have cost the federal government billions of dollars.
“This administration thinks it is enough for 25% of the industry to agree to do the right thing, but the public interest demands that 100% of the industry disgorge these royalty windfalls if they want the privilege of producing oil and gas on leases belonging to the public. Anything less is just another Bush administration gift to Big Oil,” the House lawmaker said.
At a conference in Houston, Burton estimated that of the approximately 24 companies that may have underpaid royalties, about a dozen have volunteered to pay more royalties on oil and natural gas produced on leases in the Outer Continental Shelf (OCS), primarily the Gulf of Mexico, Reuters News Service reported.
But Markey, citing Interior Department figures, believes more producers are underpaying royalties. He said 56 companies hold 576 active leases that were purchased in 1998 and 1999 and on which royalties are not being paid. The reason for nonpayment: due to an MMS mistake the leases in those two years do not contain the critical price ceilings that serve as a benchmark to determine when oil and gas production becomes subject to federal royalties. Without them, producers who negotiated leases in 1998 and 1999 have been able to escape paying royalties on production up to a specific volume limit.
The price caps were included by the MMS in leases that were negotiated in 1996, 1997 and 2000, but were not in the 1998 and 1999 leases. The Government Accountability Office (GAO) has estimated that this mistake by MMS will cost the federal government upwards of $10 billion over the life of the leases, of which nearly $2 billion has already been lost.
An amendment to a House appropriations spending bill for fiscal year 2007, sponsored by Markey and Rep. Maurice Hinchey (D-NY), would bar producers who currently hold these royalty-free leases and refuse to renegotiate them with Interior from purchasing new leases from the federal government.
The House Energy and Resources Subcommittee has been investigating since March why the price ceilings were absent from the deepwater leases that major energy companies negotiated with the federal government in 1998 and 1999. At a hearing last month, an MMS official, who signed many of the oil and natural gas deepwater leases that lacked price thresholds in those two years, told the subcommittee the oversight was a “serious mistake” that was neither intentional nor calculated, but rather was due to poor processes at the agency.
©Copyright 2006Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.
© 2020 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |