(04/05/2011)

Katie Howell, E&E reporter

A group of House Democrats today offered a measure that would clamp
down on a controversial offshore drilling royalty-relief provision.

At issue in the legislation from Rep. Ed Markey (D-Mass.) and others is
a royalty-waiver program that allows some oil companies to reduce or
eliminate their royalty payments on federal drilling leases until they
have recouped their investments.

Lawmakers initially approved the program in 1995, when oil sold for $18
a barrel and deepwater drilling was considered unprofitable without
government help. Suspended payments helped bring about a boom for the
industry in the late 1990s, but the subsidies, which were expanded by a
broad 2005 energy law, continue today despite escalating crude oil
prices. The Government Accountability Office says the loss of future
royalties could range from $20 billion to $53 billion depending on the
price of oil.

“The biggest oil companies are already getting 100 year-old tax breaks
to sell $100 a barrel oil to make $100 billion a year in profits,”
Markey said in a statement. “Oil companies don’t need a $53 billion
windfall courtesy of American taxpayers that increases our national
deficit.”

Today’s measure is not the first attempt to reform the royalty-relief
law. Markey and other Democrats have introduced similar bills in
previous Congresses, and similar language introduced as an amendment to
the first House GOP spending bill this year failed.

But the new bill comes as Democrats ramp up their criticism of GOP
resistance to cutting oil industry tax breaks as they slash other areas
of federal spending (E&E Daily, April 5).

“The Republican plan to cut the budget? Continue to cheat taxpayers out
of billions of dollars owed by the big oil companies. That’s not much
of a budget-cutting plan,” Rep. George Miller (D-Calif.), a co-sponsor
of the measure, said in a statement. “It’s time that we hold giant oil
corporations accountable for the right to use the public’s resources.
Oil companies shouldn’t be drilling for free, and in a time of rising
gas prices, we need to close this $50 billion loophole.”

The oil industry is opposed to such reforms, saying it already pays
billions to the federal government in other royalties, taxes and fees.

Joining Markey and Miller in introducing today’s measure are Democratic
Reps. Rush Holt of New Jersey, Jim Moran of Virginia, Maurice Hinchey
of New York and Lois Capps of California.
Special thanks to Richard Charter