19-05-06
In an attempt to revoke billions of dollars
worth of government incentives to oil and gas producers, the House approved a
measure that would pressure companies to renegotiate more than 1,000 leases for
drilling in the Gulf of Mexico.
The measure, approved 252 to 165 over the objections of many Republican leaders,
is intended to prevent companies from avoiding at least $ 7 bn in payments to
the government over the next five years for oil and gas they produce in publicly
owned waters.
Scores of Republicans, already under fire from voters about gasoline prices,
sided with Democrats on the issue. Eighty-five Republicans voted to attach the
provision to the Interior Department's annual spending bill.
The measure would require adoption by the Senate, which is less reflexively
supportive of the energy industry than the House, and will almost certainly
provoke intense opposition from oil and gas producers.
In a raucous debate on the House floor before the vote, Democrats argued that
energy companies were short-changing taxpayers at the same time that soaring
prices for crude oil and natural gas had pushed industry profits to record
highs.
Republican leaders, who had hoped to avoid a vote on the issue, agreed that
companies should not be getting lucrative incentives in times of high prices.
But they insisted that the government had no right to reopen valid leases that
it signed years ago with offshore drillers.
In a separate defeat for energy companies, the House voted 279 to 141 to
reject a provision that would lift a 25-year ban on oil drilling in coastal
areas outside the western Gulf of Mexico. Lawmakers also voted 217 to 203 to
continue the prohibition on drilling just for natural gas.
The lopsided vote to rescind royalty incentives, which surprised many of the
proposal's own sponsors, came three months after The New York Times disclosed
that companies drilling in publicly-owned waters of the Gulf of Mexico were set
to escape royalties on about $ 65 bn worth of oil and gas over the next five
years. The windfall stemmed in large part from a major error in about 1,000
leases that the Clinton administration signed with energy companies in 1998 and
1999.
To encourage drilling and exploration in water thousands of feet deep, the
government offered to let companies avoid the standard royalties, usually 12 %
or 16 % of sales, for large quantities of the oil and gas they produced. But the
incentives, which have been expanded in recent years by the Bush administration
and by Congress, were supposed to stop as soon as prices for oil climbed above $
34 a barrel and prices for natural gas climbed above $ 4 per thousand cf.
For reasons that are now being investigated, the Interior Department omitted the
restriction in 1,000 leases it signed in 1998 and 1999. In addition, the Bush
administration offered extra "royalty relief" to companies that drilled very
deep wells in very shallow water.
The lost royalties are just beginning to hit the government's bottom line.
The Government Accountability Office, the investigative arm of Congress,
estimated in March that the royalty incentives could cost the government $ 20 bn
over the next 25 years.
On top of that, at least one oil company, Kerr-McGee, has sued the Bush
administration in a test case to expand the "royalty relief" far more. If the
Kerr-McGee lawsuit is successful, the GAO estimated, the government could lose a
total of $ 80 bn over the next 25 years.
The amendment approved on would try to force oil companies to revise their
contracts and agree to pay full royalties when energy prices climb above the
"threshold levels."
To give the government bargaining power, the bill would also prohibit the
Interior Department from awarding any new leases to companies that refuse to
revisit their leases.
Source: AP