Found money

February 21, 2006

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.

"I don't think there's a single member of Congress who thinks you should get royalty relief at $70 a barrel," California Rep. Richard W. Pombo, chairman of the House Resources Committee, told The New York Times as he launched an investigation.

White House spokesman Scott McClellan said President Bush has long opposed granting such exploration incentives when the market price is high, and blamed the royalty relief reflected in Mr. Bush's budget on the Clinton administration.

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.

The royalty relief program was launched in 1995 to encourage oil and gas exploration at a time when prices were too low to justify the expense. As initially designed, royalty relief would end when prices reached a minimum of $34.71 a barrel for oil and $4.34 per thousand cubic feet for gas. But the Clinton administration waived those triggers for leases negotiated during 1998 and 1999.

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.

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