Bush Axes Added Oil, Gas Royalty Relief As Unwarranted February 5, 2007Posted by notapundit in US News, White House.
WASHINGTON (Dow Jones)–The Bush administration on Monday called for a repeal of two oil and natural gas royalty relief provisions, saying in its fiscal year 2008 budget it didn’t believe additional relief for Outer Continental Shelf development was warranted because of high energy prices.
Specifically, the administration called for the repeal of the deepwater lease and deep-gas royalty relief provisions in the Energy Policy Act 2005. Repealing the provisions would also cancel a prohibition from the federal government charging companies fees when they apply for drilling permits on federal lands.
Although it hasn’t yet become law, the repeal of the deepwater royalty relief incentive was part of the House’s H.R. 6 Clean Energy Act of 2007, passed by the U.S. House in January.
According to the Interior Department’s budget, total revenues from offshore oil and gas royalties are expected to increase by around $640 million to an estimated $7.04 billion from $6.4 billion in 2007. Total offshore rents and bonuses are forecast to quadruple to $2.15 billion, an increase of $1.74 billion in 2008 from an estimated $411 million in 2007. A DoI spokeswoman couldn’t immediately say if the increase was related to the proposed repeals.
The administration also axed funding in the Department of Energy’s budget, calling for a cut of two different oil and gas exploration and development research programs under the Energy Policy Act 2005.
Speaking generally about cutting subsidies to the oil and gas industry, Energy Secretary Samuel Bodman said at a budget press conference: “The president has never been in favor of or supportive of federal subsidies…for the development of oil and gas research.”
If current oil and gas prices aren’t sufficient incentive to develop reserves, “I don’t know what is,” he said.
Interior Department Assistant Secretary Stephen Allred said at a separate conference that repealing the royalty relief and a previously announced increase of royalty rates to 16.67% from 12.5% wasn’t budgeted to offset lost revenues from 1998-1999 oil and gas leases that omitted royalty price thresholds.
The controversial omission, which has already cost taxpayers nearly $1 billion in lost royalty revenues and could mean billions more in uncollected fees if the leases aren’t re-negotiated, has been the subject of a series of congressional oversight hearings.
Under H.R. 6 language, companies that refuse to re-negotiate the leases to include payment of royalties from past production, may not be able to participate in upcoming lease sales, or could pay much higher leasing fees.
By Ian Talley, Dow Jones Newswires