Never mind that oil and gas companies are raking in historic, jaw-dropping profits. Never mind that Americans are paying through the nose at the pump. Never mind the soaring federal deficit.
The Bush administration and Congress plan to let oil and gas companies keep an extra $7 billion in the next five years by waiving oil and gas royalties from drilling on federal lands, mainly in the Gulf of Mexico.
With oil expected to stay around the $50-a-barrel level in the next few years, this is highway robbery.
It gets worse: If Kerr-McGee, on behalf of the industry, wins a court challenge to another royalty fee, U.S. taxpayers could lose a total of $35 billion in potential revenue by 2011 — as The New York Times noted, “about the same amount that Mr. Bush is proposing to cut from Medicare, Medicaid and child support enforcement programs over the same period.”
Posted by Randy Scholfield
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22 Comments
I wonder how many of the geniuses at the Eagle can explain for us what Profit Margin is? How about Inventory Profit?
Maybe someone at the Eagle could be the arbiter of how much Profit is proper for any given company to earn.
If you have record revenues do to rising cost of raw material you better have record profits as well or your gonna go broke soon.
I bet there’s more than a couple regulars on this blog who can’t even explain the difference between revenue and profit.
I don’t hear any complaining from the Eagle about the record amounts of taxes being paid by big oil either.
I can’t say this with certainty, but I’ll bet the cost of those oil leases is a drop in a barrel compared to the tax revenue generated by EVIL BIG OIL!!!
I wonder if Haliburton is paying Harry’s cleaning bill in Texas? Oh,never mind, wrong thread. BWHAHAHAHAHA
Used to be you had to grease the wheels of government, now all you have to do is oil them. This does not apply to Kansas government entities. They operate on on “intelligent design” and moral stupidity.
Ian
God forbid that people should actually have to pay back money that they borowed right?
Somebody please kill me now. I agree with Ian. I mean the shrub part, not the jew bankers part. Wait, do you think the bankers who foreclose on farms are jews? Naw…I think just republicans.
Randy: And you are surprised?
You people are really missing the point. These lands belong to the American Citizen, were paid for by each and every American Citizen. Private companies are taking from these lands products that they will in turn sell to the same people who own the land that was raped!. It is little wonder that the Kansas goverment can not operate efficently when Kansans can not even grasp the concept of greed, rape of land, and theft.
The Big Oil companies also are behind on the royalities they owe the goverment by the tune of 500 million. And they want more? Paying 5% taxes to the goverment is not paying alot of taxes Heckler. If they could get away with it they would pay nothing, and in fact if they are permitted to do this by our WONDERFUL CONGRESS they will not be paying taxes when it comes right down to it.
Here is the full article from the web.
U.S. Has Royalty Plan to Give Windfall to Oil Companies
By EDMUND L. ANDREWS
Published: February 14, 2006
WASHINGTON, Feb. 13 — The federal government is on the verge of one of the biggest giveaways of oil and gas in American history, worth an estimated $7 billion over five years.
Royalty-Free Oil and GasNew projections, buried in the Interior Department’s just-published budget plan, anticipate that the government will let companies pump about $65 billion worth of oil and natural gas from federal territory over the next five years without paying any royalties to the government.
Based on the administration figures, the government will give up more than $7 billion in payments between now and 2011. The companies are expected to get the largess, known as royalty relief, even though the administration assumes that oil prices will remain above $50 a barrel throughout that period.
Administration officials say that the benefits are dictated by laws and regulations that date back to 1996, when energy prices were relatively low and Congress wanted to encourage more exploration and drilling in the high-cost, high-risk deep waters of the Gulf of Mexico.
“We need to remember the primary reason that incentives are given,” said Johnnie M. Burton, director of the federal Minerals Management Service. “It’s not to make more money, necessarily. It’s to make more oil, more gas, because production of fuel for our nation is essential to our economy and essential to our people.”
But what seemed like modest incentives 10 years ago have ballooned to levels that have alarmed even ardent supporters of the oil and gas industry, partly because of added sweeteners approved during the Clinton administration but also because of ambiguities in the law that energy companies have successfully exploited in court.
Short of imposing new taxes on the industry, there may be little Congress can do to reverse its earlier giveaways. The new projections come at a moment when President Bush and Republican leaders are on the defensive about record-high energy prices, soaring profits at major oil companies and big cuts in domestic spending.
Indeed, Mr. Bush and House Republicans are trying to kill a one-year, $5 billion windfall profits tax for oil companies that the Senate passed last fall.
Moreover, the projected largess could be just the start. Last week, Kerr-McGee Exploration and Development, a major industry player, began a brash but utterly serious court challenge that could, if it succeeds, cost the government another $28 billion in royalties over the next five years.
In what administration officials and industry executives alike view as a major test case, Kerr-McGee told the Interior Department last week that it planned to challenge one of the government’s biggest limitations on royalty relief if it could not work out an acceptable deal in its favor. If Kerr-McGee is successful, administration projections indicate that about 80 percent of all oil and gas from federal waters in the Gulf of Mexico would be royalty-free.
“It’s one of the greatest train robberies in the history of the world,” said Representative George Miller, a California Democrat who has fought royalty concessions on oil and gas for more than a decade. “It’s the gift that keeps on giving.”
Republican lawmakers are also concerned about how the royalty relief program is working out.
“I don’t think there is a single member of Congress who thinks you should get royalty relief at $70 a barrel” for oil, said Representative Richard W. Pombo, Republican of California and chairman of the House Resources Committee.
“It was Congress’s intent,” Mr. Pombo said in an interview on Friday, “that if oil was at $10 a barrel, there should be royalty relief so companies could have some kind of incentive to invest capital. But at $70 a barrel, don’t expect royalty relief.”
Tina Kreisher, a spokeswoman for the Interior Department, said Monday that the giveaways might turn out to be less than the basic forecasts indicate because of “certain variables.”
The government does not disclose how much individual companies benefit from the incentives, and most companies refuse to disclose either how much they pay in royalties or how much they are allowed to avoid.
But the benefits are almost entirely for gas and oil produced in the Gulf of Mexico.
The biggest producers include Shell, BP, Chevron and Exxon Mobil as well as smaller independent companies like Anadarko and Devon Energy.
Executives at some companies, including Exxon Mobil, said they had already stopped claiming royalty relief because they knew market prices had exceeded the government’s price triggers.
About one-quarter of all oil and gas produced in the United States comes from federal lands and federal waters in the Gulf of Mexico.
As it happens, oil and gas royalties to the government have climbed much more slowly than market prices over the last five years.
The New York Times reported last month that one major reason for the lag appeared to be a widening gap between the average sales prices that companies are reporting to the government when paying royalties and average spot market prices on the open market.
Industry executives and administration officials contend that the disparity mainly reflects different rules for defining sales prices. Administration officials also contend that the disparity is illusory, because the government’s annual statistics are muddled up with big corrections from previous years.Both House and Senate lawmakers are now investigating the issue, as is the Government Accountability Office, Congress’s watchdog arm.
But the much bigger issue for the years ahead is royalty relief for deepwater drilling.
The original law, known as the Deep Water Royalty Relief Act, had bipartisan support and was intended to promote exploration and production in deep waters of the outer continental shelf.
At the time, oil and gas prices were comparatively low and few companies were interested in the high costs and high risks of drilling in water thousands of feet deep.
The law authorized the Interior Department, which leases out tens of millions of acres in the Gulf of Mexico, to forgo its normal 12 percent royalty for much of the oil and gas produced in very deep waters.
Because it take years to explore and then build the huge offshore platforms, most of the oil and gas from the new leases is just beginning to flow.
The Minerals Management Service of the Interior Department, which oversees the leases and collects the royalties, estimates that the amount of royalty-free oil will quadruple by 2011, to 112 million barrels. The volume of royalty-free natural gas is expected to climb by almost half, to about 1.2 trillion cubic feet.
Based on the government’s assumptions about future prices — that oil will hover at about $50 a barrel and natural gas will average about $7 per thousand cubic feet — the total value of the free oil and gas over the next five years would be about $65 billion and the forgone royalties would total more than $7 billion.
Administration officials say the issue is out of their hands, adding that they opposed provisions in last year’s energy bill that added new royalty relief for deep drilling in shallow waters.
“We did not think we needed any more legislation, because we already have incentives, but we obviously did not prevail,” said Ms. Burton, director of the Minerals Management Service.
But the Bush administration did not put up a big fight. It strongly supported the overall energy bill, and merely noted its opposition to additional royalty relief in its official statement on the bill.
By contrast, the White House bluntly promised to veto the Senate’s $60 billion tax cut bill because it contained a one-year tax of $5 billion on profits of major oil companies.
The House and Senate have yet to agree on a final tax bill.
The big issue going forward is whether companies should be exempted from paying royalties even when energy prices are at historic highs.
In general, the Interior Department has always insisted that companies would not be entitled to royalty relief if market prices for oil and gas climbed above certain trigger points.
Those trigger points — currently about $35 a barrel for oil and $4 per thousand cubic feet of natural gas — have been exceeded for the last several years and are likely to stay that way for the rest of the decade.
So why is the amount of royalty-free gas and oil expected to double over the next five years?
The biggest reason is that the Clinton administration, apparently worried about the continued lack of interest in new drilling, waived the price triggers for all leases awarded in 1998 and 1999.
At the same time, many oil and gas companies contend that Congress never authorized the Interior Department to set price thresholds for any deepwater leases awarded between 1996 and 2000.
The dispute has been simmering for months, with some industry executives warning the Bush administration that they would sue the government if it tried to demand royalties.
Last week, the fight broke out into the open. The Interior Department announced that 41 oil companies had improperly claimed more than $500 million in royalty relief for 2004.
Most of the companies agreed to pay up in January, but Kerr-McGee said it would fight the issue in court.
The fight is not simply about one company. Interior officials said last week that Kerr-McGee presented itself in December as a “test case” for the entire industry. It also offered a “compromise,” but Interior officials rejected it and issued a formal order in January demanding that Kerr-McGee pay its back royalties.
On Feb. 6, according to administration officials, Kerr-McGee formally notified the Minerals Management Service that it would challenge its order in court.
Industry lawyers contend they have a strong case, because Congress never mentioned price thresholds when it authorized royalty relief for all deepwater leases awarded from 1996 through 2000.
“Congress offered those deepwater leases with royalty relief as an incentive,” said Jonathan Hunter, a lawyer in New Orleans who represented oil companies in a similar lawsuit two years ago that knocked out another major federal restriction on royalty relief.
“The M.M.S. only has the authority that Congress gives it,” Mr. Hunter said. “The legislation said that royalty relief for these leases is automatic.”
If that view prevails, the government said it would lose a total of nearly $35 billion in royalties to taxpayers by 2011 — about the same amount that Mr. Bush is proposing to cut from Medicare, Medicaid and child support enforcement programs over the same period.
tellitasitis
5% taxes? My B.S. meter is pegged.
Take a stand Randy and fellow Libs: Walk to work! (Or to your mailbox to pick up your gov’t check!).
People in Kansistan aren’t known for being too bright. They were using the line “Big Oil isn’t making the money, it’s OPEC”!
Especially since socialist are demanding the so called “windfall profit tax” on big oil, they forget the big oil paid for than $100 Billion… that is with a “B” people, in taxes in 2005.
So much for the so called obsence profits. Wondering what the government is doing with their so called $100 billion in profits from the oil companies last year.
Business is inherently evil. That is unless you are the buisinessman.
If oil is oh so an integral part of this economy, I’d say it’s time to nationalze that industry. I mean if it is so very vital and all. Even THREATENING that might do wonders. Oil execs might even show up to answer to Congress as to these obscene profits.
What I’d rather see happen is true investment in alternatives to oil. Make a SERIOUS committment to that and just WATCH those oil prices…….and the obscene oil company profits go more in a realistic direction.
Of course that is not going to happen as long as the administration of this nation is made up of, funded by, and fully in bed with “big oil”.
Here is another one from the web just showing how “we the people” are getting shoved up ours by the friendly King Bush White House. Where are the Kansas congressional delegation? Must have been asleep at the desk, tired from counting all the bribes they had. You would think they would get staffers to count the money, but then the less that know about it the better.
Here is the article:
Bush Admin. spent over $1.6 Billion on advertising and P.R. since 2003, GAO finds02/13/2006 @ 11:42 amFiled by RAW STORY
From a release to RAW STORY:
Today Rep. Henry A. Waxman, Democratic Leader Nancy Pelosi, Rep. George Miller, Rep. Elijah E. Cummings, and other senior Democrats released a new Government Accountability Office report finding that the Bush Administration spent more than $1.6 billion in public relations and media contracts in a two and a half year span.
“The government is spending over a billion dollars per year on PR and advertising,” said Rep. Waxman. “Careful oversight of this spending is essential given the track record of the Bush Administration, which has used taxpayer dollars to fund covert propaganda within the United States.”
“No amount of money will successfully sell the Bush Administration’s failed policies, from the war in Iraq, to its disastrous energy policy, to its confusing Medicare prescription drug benefits,” said Democratic Leader Pelosi. “The American people know the Bush Administration is on the wrong track and the White House PR machine won’t change that fact.”
“The extent of the Bush Administration’s propaganda effort is unprecedented and disturbing,” said Rep. Miller. “The fact is that after all the spin, the American people are stuck with high prescription drug prices, high gas prices, and high college costs. This report raises serious questions about this Administration’s priorities for the country and I would hope that my colleagues on both sides of the aisle would agree that changes need to be made to reign in the President’s propaganda machine.”
“It is unbelievable that the Administration, on several occasions, has used limited taxpayer dollars to secretly promote initiatives such as No Child Left Behind, while underfunding money for our schools, books, technology, and after school programs,” said Rep. Elijah E. Cummings.
Democrats requested that GAO conduct the study after evidence emerged last year that the Bush Administration had commissioned “covert propaganda” from public relations firms. Several federal departments had hired firms to develop “video new releases” to promote department initiatives which appeared to television viewers to be independent newscasts. Other revelations that triggered the GAO report included the disclosure that the Department of Education paid conservative commentator Armstrong Williams to promote the No Child Left Behind Act on the radio and in his columns.
To conduct its study, GAO obtained information from seven federal departments on all public relations, advertising, and media contracts during 2003, 2004, and the first two quarters of 2005. GAO found that during that time:
The Administration spent $1.6 billion on contracts with advertising agencies ($1.4 billion), public relations firms ($197 million), and media organizations and individual members of the media ($15 million).
The Department of Defense spent the most on media contracts, with contracts worth $1.1 billion. The Department of Health and Human Services spent more than $300 million on these contracts, the Department of Treasury spent $152 million, and the Department of Homeland Security spent $24 million during this period.
The Administration’s public relations and advertising contracts spanned a wide range of issues, including Administration priorities like “marriage-related research initiatives,” message development presenting “the Army’s strategic perspective in the Global War on Terrorism,” and an FDA contract to warn the public of the consequences and potential danger of importing prescription drugs from other nations.
The detailed list of contracts provided by the Air Force demonstrates the wide range of public relations and advertising contracting entered into by the federal government. This list included $179 million for a recruitment advertising campaign, more than $35,000 for promotional materials for a golf program, including “golf towel with embroidered design and golf tees with imprint,” and $10, 212 for “prize giveaways, such as cruises to Mediterranean and to Canada/New England.”
GAO’s accounting of the Bush Administration’s public relations and advertising contracts is limited. GAO surveyed only seven of the 15 cabinet-level departments, relied on self-reported information from the agencies, and did not include subcontracts, task orders on existing contracts, or public relations work done by government employees.
For a fact sheet on the GAO report and the report itself, visit http://www.democrats.reform.house.gov
“Wondering what the government is doing with their so called $100 billion in profits from the oil companies last year?”
Giving it to Haliburton?
Found out the so called waiving oil and gas royalties has been in place and proposed by William Clinton. Since 1995.
Hmmm… I guess it’s still Bush’s fault. Funny how Democrats are mad, I guess they never do their homework or know the details of anything. Such incompetance. But expected.
I’ll give you libs a source, crediable, and with audio so you can listen instead of reading it.
http://www.npr.org/templates/story/story.php?storyId=5218122
That’s right! NPR baby! Not Foxnews.
Also! Get a load of this Libs.
Here is an article by the AP that reports that the Federal Government actually reported a budget surplus in the month January.
http://www.chron.com/disp/story.mpl/business/3650681.html
Oh! I’m just laughing my butt off. This is great. :D
Joe, you might wanna tone down that celebration. It is only one month. We are still running the country at overall record deficits, despite higher “tax collections” than predicted in January. Arent you supposed to be an anti-tax guy?
Did you read this part Joe?
The Bush administration on Monday estimated that the deficit for this year will hit a record in dollar terms of $423 billion, surpassing the old mark of $413 billion set in 2004.
I have concluded that ksfrmgrl is actually the old Galahad. His/Her name changes every now and then when the heat gets to be too much.
This is just the tip of the iceberg. Rumor has it that the underreporting of oil royalties, monies owed to the government for taking oil from government owned land, is at an all time high. But there is an answer. Anyone who knows of a company underreporting oil royalties can filed a claim to recover triple the amount defrauded from the government, and may get to keep up to 30% for themself as a reward. For great info on this, go to FederalFraud.com