Quantcast

Government Loophole Sacrificed $18 Billion to Big Oil

Energy

Federal investigators found that big oil companies have taken advantage of a government loophole that gave energy companies a break on paying royalties when drilling in deep water. The loophole has allowed some of the world's largest energy firms to pocket an extra $18 billion, as Bloomberg reported.


The Government Accountability Office's (GAO) detailed accounting of a mistake lawmakers made was first reported yesterday and projects that it will continue to cost taxpayers for decades to come, as the New York Times reported.

The loophole dates back to a 1995 law that urged companies to drill in the Gulf of Mexico by offering oil companies a break from paying royalties on the oil produced. However, when the law was written, some of the wells saw their temporary break from taxes on royalties made permanent, according to the New York Times.

The foregone revenue will continue to climb as energy companies continue to harvest oil and gas from the wells protected from taxes. The GAO report said that some of the biggest oil companies in the world, including Chevron, Shell, BP, Exxon Mobil and others, have so far avoided paying at least $18 billion in royalties since 1996.

The oil industry has used some of that extra money in court to defend its right to continue the practice, according to the New York Times.

They were successful. In 2007, a federal court ruled that the Interior Department could not force companies to pay royalties on production from even more deep-water leases signed between 1996 and 2000. The court said the federal law stopped the Interior Department from collecting any fees on the royalties. An appeals court said that for the Interior Department to collect any fees then Congress would have to change the law, according to Bloomberg.

"That wasn't our intent," said J. Bennett Johnston, a former Democratic senator from Louisiana who had pushed for the original reprieve on royalties, as the New York Times reported. "There should have been a provision that said it didn't apply above a certain threshold" for oil prices, he added.

But, oil industry representatives have pointed back to the 2007 ruling.

"The courts have ruled there was nothing ambiguous about the 1995 act," said Ben Marter, a spokesman for the American Petroleum Institute, as Bloomberg reported. "Those who would require the companies that took Congress at its word to now pay royalties retroactively are engaging in a dangerous game of bait-and-switch."

"There was no mistake in the law," said Nicolette Nye, vice president of the National Ocean Industries Association, which represents the offshore drilling industry. If not for the law, she said, "we likely would not be producing U.S. oil offshore in record amounts today," as the New York Times reported.

However, the idea that the industry should not pay anything on the $90 billion it made in offshore drilling royalties from 2006 to 2018 nor pay anything in the future represent an extreme failure of the Department of Interior to see that American taxpayers receive a fair market value for the oil and gas extracted from public property, according to Frank Rusco, a director of the GAO's Natural Resources and Environment team and the report's author, as the New York Times reported.

"These leases sold 20 years ago might keep producing for decades. The amount of forgone royalties is going to continue to increase," Mr. Rusco said in an interview, according to the New York Times. "It's a strong case for Interior to review how it collects revenues on oil and gas."

EcoWatch Daily Newsletter

By Sabrina Kessler

Far-reaching allegations about how a climate-sinning American multinational could shamelessly lie to the public about its wrongdoing mobilized a small group of New York students on a cold November morning. They stood in front of New York's Supreme Court last week to follow the unprecedented lawsuit against ExxonMobil.

Read More Show Less

By Alex Robinson

Leah Garcés used to hate poultry farmers.

The animal rights activist, who opposes factory farming, had an adversarial relationship with chicken farmers until around five years ago, when she sat down to listen to one. She met a poultry farmer called Craig Watts in rural North Carolina and learned that the problems stemming from factory farming extended beyond animal cruelty.

Read More Show Less
Sponsored
People navigate snow-covered sidewalks in the Humboldt Park neighborhood on Nov. 11 in Chicago. Scott Olson / Getty Images

Temperatures plunged rapidly across the U.S. this week and around 70 percent of the population is expected to experience temperatures around freezing Wednesday.

Read More Show Less
A general view of the flooded St. Mark's Square after an exceptional overnight "Alta Acqua" high tide water level, on Nov. 13 in Venice. MARCO BERTORELLO / AFP / Getty Images

Two people have died as Venice has been inundated by the worst flooding it has seen in more than 50 years, The Guardian reported Wednesday.

Read More Show Less
Supply boats beside Aberdeen Wind Farm on Aug. 4, 2018. Rab / CC BY 2.0

President Donald Trump doesn't like wind turbines.

In April, he claimed they caused cancer, and he sued to stop an offshore wind farm that was scheduled to go up near land he had purchased for a golf course in Aberdeenshire in Scotland. He lost that fight, and now the Trump Organization has agreed to pay the Scottish government $290,000 to cover its legal fees, The Washington Post reported Tuesday.

Read More Show Less
Sponsored
A verdant and productive urban garden in Havana. Susanne Bollinger / Wikimedia Commons

By Paul Brown

When countries run short of food, they need to find solutions fast, and one answer can be urban farming.

Read More Show Less
Trevor Noah appears on set during a taping of "The Daily Show with Trevor Noah" in New York on Nov. 26, 2018. The Daily Show With Trevor Noah / YouTube screenshot

By Lakshmi Magon

This year, three studies showed that humor is useful for engaging the public about climate change. The studies, published in The Journal of Science Communication, Comedy Studies and Science Communication, added to the growing wave of scientists, entertainers and politicians who agree.

Read More Show Less
rhodesj / Flickr / CC BY 2.0

Cities around the country are considering following the lead of Berkeley, California, which became the first city to ban the installation of natural gas lines in new homes this summer.

Read More Show Less