Report: Oil firms avoid $7B in payments
Despite record profits, government loses out thanks to incentive designed to encourage domestic oil production, newspaper says.
NEW YORK (CNNMoney.com) - Despite record profits, the oil industry is set to skip out on $7 billion in royalty payments it would normally pay for drilling on government land thanks to a '90s era law designed to promote domestic production, according to a report published Tuesday. The loophole, found deep in the Interior Department, lets companies pump an estimated $65 billion worth of oil from public land over the next five years without paying any royalties to the government, The New York Times reported.
The newspaper said the government's projections show that with an estimated price of crude at $50 a barrel and a usual royalty payment of 12 percent, the government is giving up roughly $7 billion. "It's one of the greatest train robberies in the history of the world," Rep. George Miller, a California Democrat who has fought royalty concessions on oil and gas for more than a decade, told the Times. "It's the gift that keeps on giving." The exemption was originally introduced by the Clinton administration during the mid '90s, when oil was much cheaper, to encourage companies to boost expensive, deep-water oil production from the Gulf of Mexico, the Times reported. "We need to remember the primary reason that incentives are given," Johnnie M. Burton, director of the federal Minerals Management Service, told the Times. "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." The Times said there is little Congress can now do to reverse its earlier giveaway except impose new taxes on oil company profits, a move the Bush administration has strongly opposed. _______________ Exxon Mobil sets profit record. Click here.
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