Billions in 'Relief' for Oil Companies (Pombo Diaries #15)

Like they need it!  This emerged from ongoing research on Rep. Richard Pombo (R, CA-11.)    2/21 editorial in the Baltimore Sun:

Much of official Washington seemed shocked to learn last week that the federal government expects to forgo $7 billion in royalties over the next five years from gas and oil drilling off the Gulf Coast at a time when the energy industry is making record profits.

Also, Interior is cutting back on audits of oil company royalties, putting the industry more or less on the "honor system".  Finally, a postscript about a petulant Rep. Pombo cutting short an interview with local California TV.

Cross-posted at ePluribusMedia.

The "Royalty Relief" program is intended to give incentives to the oil industry for exploration costs when oil prices are low.  Pretty much everyone agrees that isn't the case now.  But the industry is, apparently, still benefiting handsomely. Rep. Richard Pombo (R, CA-11), Chairman of the House Resources Committee, felt the need to take exception to the Sun editorial in a letter to the editor published today.   Would you be surprised to know that he's blaming the problem on Clinton?

I feel that The Sun's editorial Found money (Feb. 21) unfairly characterized Congress' recent work on this issue.  I want to make my position abundantly clear: I do not believe production incentives for oil and gas should apply during periods of record-high prices.

From a Feb 16 article in the NY Times, which follows up another article from two days earlier...

...drawing on the Interior Department's budget plan for next year, reported that the administration expected to give more than $7 billion of "royalty relief" to companies producing oil and gas on federal leases in the Gulf of Mexico.  The article also disclosed the energy companies had begun a court room challenge to a crucial restriction on the incentive that would, if successful, reduce their taxes by $35 billion or more by 2012.

In reponse to the 2/14 article, Pombo sent a letter to Gale Norton, Secretary of the Interior, requesting memos and other info on the matter.  As of today, no indications that hearings have been scheduled; that anyone will be called in to testify under oath.  Again from The Times 2/16:

Mr. Pombo made it clear that a primary purpose of his investigation was to attribute much of the problem to decisions by the Clinton administration to sweeten the incentives in 1998 and 1999.

As if there weren't a Republican Congress back in the mid-90s, when this problem originated.  The Sun Editorial has a different take on the story.

But House Republicans, with no interference from the White House, blocked an attempt last year by Massachusetts Democrat Rep. Edward J. Markey to suspend the royalty relief program when prices rise. What's more, there's nothing to stop Congress from suspending the program now. And that's exactly what lawmakers should do. This $7 billion is like found money. The social programs squeezed in Mr. Bush's budget could put it to far better use than further fattening the bottom lines of profit-rich companies such as Exxon Mobil. A particularly appropriate use for royalties earned from mostly deepwater drilling in the Gulf of Mexico would be restoration of the coastline damaged by Hurricanes Katrina and Rita.

Especially if you consider that petroleum's a the major contributor to greenhouse gases, likely to be contributing to worse storm damage to the Gulf Coast.

Some energy companies are balking at paying royalties even in these flush times. Mr. Markey's legislation suspending the relief program was designed to avoid legal challenges by requiring the drilling leases to be renegotiated. If Mr. Bush and Congress are truly opposed to extending charity to a wealthy industry at the same time taxpayers are struggling with pump prices and federal programs for the poor are on the chopping block, the royalty relief program should be promptly scrapped.

This $7 billion is apparently not enough for the oil industry (Times, 2/16):

House Republicans are also scrambling to head off a far more serious courtroom challenge by energy companies, led by Kerr-McGee Exploration and Development...  Oil and gas executives plan to argue that Congress wanted royalty relief to be automatic, regardless of how high prices might climb, for all leases awarded between 1996 and 2000.

(That being Gingrich's Contract with America Congress.)  This would be another $35 billion of relief, on top of the $7 billion mentioned in the opening paragraph of this story. Meanwhile, the Administration's put the oil industry on the "honor system" when it comes to paying royalties for energy extracted from public lands & waters.  From today's New York Times:

The Bush administration is scaling back on audits of energy companies that pay billions of dollars for leases to produce oil and gas on federal property, state officials said.

Royalties collected by the feds are shared 50-50 with the relevant state.  (Except Alaska, which gets 90% of the royalties from extraction in the largest state.)  States & tribes are objecting...  Again from today's Times:

The changes have drawn protests from several oil-producing states and American Indian tribes, which receive a share of the royalties energy companies pay the federal government for oil and gas produced on public lands.  Those royalties have risen much more slowly then prices for oil and gas, which reach record highs last year, and are expected to remain high for several years.

Interior has some double talk about lag times.

But in a letter last week to House members, a group of state and tribal auditors said that the Interior Department had cut back on audits in favor of a much looser approach known as "compliance review" that could miss many instances of cheating. "Compliance reviews do not involve getting underneath the reported information to look at company's books," wrote Lisa Dockter, chairwoman of the Association of State and Tribal Auditors.  As a result, she said, the government would not be able to confirm whether a company's report was accurate.

Yipes!  Don't these people ever have enough?  Almost seems like some sort of spiritual sickness...

Postscript

This has been a wet winter in northern California.  The levees in the delta of the San Joaquin River are in poor repair, with danger of flooding as the mountain snows melt very real.  If your congressional district were located as Pombo's CA-11 is, you'd have some grounds for concern:

Rep. Richard Pombo (R, CA-11), Sen. Diane Feinstein & Gov. Arnold Schwarzengger toured the Delta by helicopter last week, and there's been pretty wide media interest in this incipient disaster, including a Sacramento Bee story about that media coverage. You have to register (but not pay) at the Sacramento Bee to read this from a story about Channel 13 (KOVR):

Field reporters are trying to be more agressive by asking tough questions.  But reporter Rafer Weigel's impromptu "60 Minute" [style} grilling of Rep. Richard Pombo, R-Tracy, about the Jack Abramoff scandal during an event to highlight Sacramento's levee problems came off as grandstanding.  Pombo's press "handler" cut off the interview...