Injury plus insult

December 13, 2006

Folks who have to pinch local government pennies down in the states along the Gulf of Mexico can barely control their glee at the windfall Congress provided them shortly before adjourning last weekend.

Lawmakers voted to lift a ban on far-offshore oil and gas drilling in the gulf, and to share royalties on the leases with Louisiana, Mississippi, Alabama and Texas.

The states should take care to ensure, though, that those royalties actually get collected. It seems the federal agency in charge of monitoring the leases is so lax there are no guarantees.

At a time when the energy industry is enjoying rocketing profits, the Bush administration continues to deliver it favors - both overt and as a result of negligence.

The good news is that the legislation opening 8.3 million acres of gulf waters to drilling was whittled down from an earlier, more controversial proposal that would also have lifted a quarter-century ban on drilling along the Pacific and Atlantic coasts, threatening Maryland beaches and the Chesapeake Bay.

Support for the final bill was ensured by granting a share of the royalties to the gulf states, which don't get any direct benefit from the drilling under way closer to their shores.

At the same time, though, the Republican-led Congress refused to close a loophole in oil and gas leases, negotiated during the Clinton administration, that allows royalties to go unpaid.

The aim of the royalty waiver was to encourage exploration when oil prices are low. But a drafting flaw continues the waiver even when profits are high. No energy companies have volunteered to renegotiate those flawed leases and Congress resisted a bid to require such renegotiation as a condition for bidding on new leases.

Meanwhile, the Interior Department's inspector general reported last week that the agency that collects the royalties is so understaffed it can't do independent audits. The Minerals Management Service must rely on oil and gas companies to report whether they are in arrears on royalties.

All in all, it's a triple bad deal for federal taxpayers: Their resources are sold with little concern for the consequences, at rock-bottom prices that may never get paid. Untold billions are believed to have been lost.

Democrats taking over Congress next year are confident they can at least close the waiver loophole; potentially they could also beef up the audit and collection resources at Interior, though greater efficiency is no guarantee.

What almost certainly can't be reversed is the decision to expand deep-water drilling in the Gulf. Those four states are too eager for their share of the take - however short it may turn out to be. A terrible precedent.

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