Lands: Sweet energy deals
Legal heist. The land at the bottom of the Gulf of Mexico belongs to the public. So when energy companies extract oil and gas, they pay a share of the proceeds, or royalty, to the government.
At least that's how the system is supposed to work. This week came the disclosure, first in The New York Times, that energy companies won't have to pay a nickel for an estimated $66 billion worth of oil and gas to be taken from government-owned sites in the Gulf over the next five years.
That's right: Certain companies, currently enjoying record profits, will earn at least $7 billion more by not having to pay the usual royalty of 12% to 16% for pumping oil and gas from public property. Thanks to a generous investment in Washington's pliant politicians, this heist is perfectly legal. A decade ago, when oil prices were relatively low and exploration was slack, the industry got royalty relief written into law. With bipartisan support, Congress voted to waive royalties for a time as an incentive to spur potentially costly deep-water drilling in the Gulf. It seemed to many like a good idea.
Some of the leases issued under the program supposedly have caps requiring royalties when oil prices are high, as they are today. But the Clinton administration was so eager to offer incentives to the industry that, in 1998 and 1999, leases were issued with all royalties waived. Now, several oil companies are claiming that the royalty caps on other leases are not valid and that they're entitled to an open-ended raid on this public resource. The cost to the Treasury could be $35 billion or more, almost enough to pay for the federal government's law enforcement activities this year. From 1989 to 1996, the oil and gas industry showered nearly $75 million in campaign contributions on candidates for the White House and Congress. That sounds like a lot of money, but $35 billion, or even $7 billion, is a whopping return on its investment.
Now, embarrassed politicians are scrambling to undo the deal. Congress can't do much about the giveaways in contracts already signed, so the public is stuck giving away its wealth while the Treasury runs dry. With oil selling for nearly $60 a barrel - and as much as $70 in recent months - there's ample incentive for companies to invest in exploration. Of course, until Congress radically changes its ways, investing in politics may pay more.
http://news.yahoo.com/s/usatoday/20060217/cm_usatoday/sweetenergydeals
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