Drill Baby, Drill

[LoveLife&Laughter]

Taxpayers Stand To Lose $49 Billion In Offshore Drilling Gambit

Another Give-Away to the Richy-Riches?

[A4L]

  "A new report released today by the Center for American Progress finds that the proposal — called the “Fixing America’s Inequities with Revenues Act” (FAIR Act) and sponsored by Sens. Mary Landrieu (D-LA), Lisa Murkowski (R-AK) — would cost U.S. taxpayers more than $49 billion by 2040 while providing a windfall to just five states.."-from link

That is less than 2 billion a year. And I did not see if the article mentioned any benefits by drilling for oil did you?
If we have more of our own oil does it not make us less dependent on foreign oil and strengthen our country just by virtue of needing oil from those that may not have our interests at heart? Could this also not contribute to the price going down for consumers?

Why did a democrat sponsor the bill along with the republican? For what reason did Mary Landrieu sponsor it other than because it might benefit her state? All I am getting at is there not some plus sides to this and some minus sides?

We have seen that the ACA has plus and minus's attached to it. Most everything that is done effects some people favorably and some negatively.


Are there no positives here is the question? Will some people become employed as a result? Is that not positive?

Maybe there is a modification that could create incentives that would be translated into a better result.  Just like the ACA seeks to limit the profit margins of certain aspects of insurers (I have been told) why could this not be added here?


Why can't people find some compromises that benefit more people but not to become windfalls to the ultra rich?

It is perfectly possible?

[LoveLife&Laughter]

[A4L]

Hey I feel like we are getting somewhere now.

I hear the warmth :0)

[ProblemAgain]

like the oil companies need more breaks?

Business

Home>Collections>Oil Companies

Lawmaker attacks oil companies’ ‘free’ drilling in Gulf of Mexico

By Steven Mufson,February 26, 2013

• 

A 1995 law has let companies dodge $11 billion in royalties, Rep. Markey… (Gerald Herbert/AP )

Once upon a time, the price of oil was so low — dropping under $11 a barrel in late 1998 — that Congress agreed that big oil companies needed incentives to drill for oil in the federal waters of the Gulf of Mexico. So in 1995, it ordered the Interior Department to waive royalties on virtually all of the oil and natural gas that would come out of wells drilled between 1996 and 2000.

Rep. Edward J. Markey (D-Mass.), the ranking member of the Natural Resources Committee, has come up with an estimate of how much money the oil companies would have paid so far: $11 billion.

The committee’s Democrats have released a report that says roughly 25 percent of the oil currently produced in the Gulf of Mexico is not subject to royalty payments. It says more than 100 oil and gas companies fully or partially own more than 200 royalty-free leases for deep-water drilling in the Gulf of Mexico. And they could pump enough oil and gas from those wells over the next 10 years to generate $15.5 billion more in royalties — if they owed them.

The biggest beneficiaries, including their wholly-owned subsidiaries, so far: Chevron, which under ordinary royalty terms would have paid $1.5 billion, and Anadarko Petroleum, which would have paid more than $1 billion. Other leading winners are BP with $772 million, BHP Billiton with almost $680 million and Hess with more than $565 million. Altogether the industry has pumped almost 840 million barrels of oil and 3.4 trillion cubic feet of natural gas royalty-free, the report says.

State-owned or partially state-owned foreign firms — including Italy’s Eni, Norway’s Statoil, and Brazil’s Petrobras — also own shares of leases not subject to royalties, the report says.

The oil companies have rejected Markey’s estimate as an effort to reignite an old feud about the Outer Continental Shelf Deep Water Royalty Relief Act of 1995. They say the real bottom line is that without the royalty breaks, the wells would not have been drilled. Then there would be fewer oil and gas supplies — and still no revenue for the federal government.

“The Deep Water Royalty Relief Act was a good example of sound, constructive energy policy that was very successful in establishing a reliable source of domestically produced energy,” said John Christiansen, spokesman for Anadarko. “Without the DWRRA incentives that spurred these long-term investments, much of the domestic production in these frontier areas of the deep-water Gulf of Mexico would not exist today.”

Moreover, he said, the lease bonuses, royalties and income taxes on deep-water production paid to the federal government from other wells still total in the billions of dollars “and have grown markedly since 1995.”

Of course, oil prices also have grown markedly since 1995, up ninefold from the nadir of 1998.

As oil prices soared, lawmakers and the Interior Department tried to revoke the waiver, invoking a clause requiring that royalties be paid when oil passed a price of $28 a barrel (adjusted for inflation) or when production volume passed certain thresholds.

But one of the companies, Kerr McGee, later acquired by Anadarko, filed suit and won appeals court backing for its assertion that the Interior Department lacked authority under the 1995 act to impose price thresholds. After the Supreme Court decided not to hear the case, oil companies — which had been paying the royalties anyway pending an outcome to the case — received refunds. Markey says the provisional payments show that the companies did not need relief to begin with.

With record high oil prices, the 1995 deal looks worse and worse from the government’s point of view. And Markey is saying that undoing it could contribute a small portion of the revenue needed to avoid the looming automatic spending cuts known as sequestration. The current royalty rate on offshore oil is 18.75 percent.

“Oil companies were drilling just fine on these leases before they went to court to spurn the taxpayer and drill for free,” said Markey, who is again urging Congress to cancel the royalty breaks. “Now that oil is hovering near $100 a barrel and there are more than 3 billion barrels of oil equivalent left in these wells, there is no reasonable argument for oil companies to make to continue cheating U.S. taxpayers at the well and then ask for more money at the pump.”

But the companies are not about to endorse that idea.

“Chevron pays all royalties as required by law and our contracts,” Chevron spokesman Russell Johnson said in an e-mail. He noted that Chevron is one of the largest leaseholders in the Gulf of Mexico.

[ProblemAgain]

Oil and Gas Royalties:

The Federal System for Collecting Oil and Gas Revenues Needs Comprehensive Reassessment

GAO-08-691, Sep 3, 2008

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In fiscal year 2007, domestic and foreign companies received over $75 billion from the sale of oil and gas produced from federal lands and waters, according to the Department of the Interior (Interior), and these companies paid the federal government about $9 billion in royalties for this oil and gas production. The government also collects other revenues in rents, taxes, and other fees, and the sum of all revenues received is referred to as the "government take." The terms and conditions under which the government collects these revenues are referred to as the "oil and gas fiscal system." This report (1) evaluates government take and the attractiveness for investors of the federal oil and gas fiscal system, (2) evaluates how the absence of flexibility in this system has led to large foregone revenues from oil and gas production on federal lands and waters, and (3) assesses what Interior has done to monitor the performance and appropriateness of the federal oil and gas fiscal system. To address these issues, we reviewed expert studies and interviewed government and industry officials.

In addition to having a low government take, the deep water Gulf of Mexico and other U.S. regions are attractive targets for investment because they have large remaining oil and gas reserves and the U.S. is generally a good place to do business compared to many other countries with comparable oil and gas resources. Multiple studies completed as early as 1994 and as recently as June 2007 indicate that the U.S. government take in the Gulf of Mexico is lower than that of most other fiscal systems. For example, data GAO evaluated from a June 2007 industry consulting firm report indicated that the government take in the deep water U.S. Gulf of Mexico ranked 93rd lowest of 104 oil and gas fiscal systems evaluated. Generally, other measures indicate that the United States is an attractive target for oil and gas investment. The lack of price flexibility in royalty rates--automatic adjustment of these rates to changes in oil and gas prices or other market conditions--and the inability to change fiscal terms on existing leases have put pressure on Interior and the Congress to change royalty rates in the past on an ad hoc basis with consequences that could amount to billions of dollars of foregone revenue. For example, royalty relief granted on leases issued in the deep water areas of the Gulf of Mexico between 1996 and 2000--a period when oil and gas prices and industry profits were much lower than they are today--could cost the federal government between $21 billion and $53 billion, depending on the outcome of ongoing litigation challenging the authority of Interior to place price thresholds that would remove the royalty relief offered on certain leases. Further, royalty rate increases in 2007 are expected to generate modest increases in federal revenues from future leases offered in the Gulf of Mexico

[exedir]

Interesting in all of this is the current state of the oil market and supply.  Of course, the price of Brent Crude took a bump after the collapse of the Iranian nuclear talks this weekend, and the weaker $ added to the increase, however, supply levels remain high and refiners are in the production of winter gas which is cheaper and easier to produce.

In reports, the American domestic production of oil will exceed that of Saudi Arabia in 2016 and some have estimated supply independence of domestic production may be reached in 2020 or there abouts.  Overall, cheaper gas is a incentive to the economy and a better stimulus that a stimulus for most Americans.