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Wednesday, 26 May 2010 05:33

It's Time: If the Senate Can't Close Oil Company Loopholes Now, We May as Well Rename the Nation the United States of Big Oil

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BUZZFLASH NEWS ANALYSIS
by Meg White

When calculating the cost of offshore drilling on our nation's coastline, its easy to point to the millions in clean-up costs and economic damages to affected communities racked up in the explosion of a BP-run oil rig in the Gulf of Mexico. 

BP has assured us all that it will pay "all legitimate claims" regardless of whether it hits the $75 million cap set by the Oil Pollution Act of 1990. BP's latest estimate of the clean-up costs more than a week ago was a whopping $625 million, and they haven't even fully stopped the leak yet. Experts are already warning the total could top $2 billion.

Before we get too weepy about BP's financial future, however, let's keep in mind that Big Oil has been screwing the American taxpayer out of much needed funds for decades. And if only one good thing comes of this oil spill, it may be cuts in the subsidies that many agree allow for cheap, but increasingly dangerous oil.

The LA Times put together something of a tally of the economic damages done to the deficit thanks to the industry (emphasis mine):

Since the government began aggressively issuing offshore drilling permits under President Reagan, the industry has received tens of billions of dollars in tax breaks and subsidies, including exemptions from royalty payments — the fees due when a company extracts resources from U.S. government property...

The Government Accountability Office estimates that the deep-water waiver program could cost the Treasury $55 billion or more in lost revenue over the life of the leases, depending on the price of oil and gas and the performances of the wells.

Congress had originally intended to provide royalty relief only when oil prices were especially low. But an Interior Department error in the drafting of contracts in the 1990s led the industry to argue against pegging the relief to oil prices.

Oil companies won a lawsuit last year requiring the government to pay back $2.1 billion in royalties from previous years, including about $240 million to BP.

An increasing number of analysts say the waiver program has pushed drilling into fragile and remote areas where emergency response plans were inadequate.

The piece goes on to note that back in the 1980s the average price for a drilling permit went down from $2,224 to $263 an acre, and that the U.S. earns less from oil drilling than 93 of the 104 drilling jurisdictions around the world. With all the worry about the debt burden of the U.S. Treasury of late, one would think these numbers would make more news.

To be fair, the House has been working to get some of this money back (or at least stop the hemorrhaging) for years now. Measures to end subsidies for and increase royalties paid by Big Oil have had little trouble passing in the House, but always falter when they hit the Senate. 

That may be about to change. Not only does the notion of ending tax breaks for Big Oil resonate with the White House, but a bill introduced in the Senate on Monday called The Close Big Oil Tax Loopholes Act seeks to do just that. 

Introduced by Sen. Robert Menendez (D-NJ) and co-sponsored by Sens. Bill Nelson (D-FL) and Jeff Merkley (D-OR), the legislation would pay an estimated $20 billion back into the treasury over the next 10 years.

In a press release, Nelson explained the inaction in the Senate, saying “Previous attempts to close these loopholes were dead-on-arrival, because of the industry’s clout. Maybe that won’t be the case this time.”

It does seem to be about that time. After all, it's clear that the disaster in the Gulf is giving fodder to this issue. Menendez used the oil spill as a rhetorical flourish in his defense of the bill's passage:

“The flow of revenues to oil companies is like the gusher at the bottom of the Gulf of Mexico: heavy and constant,” said Menendez. “There is no reason for these corporations to shortchange the American taxpayer. They certainly aren’t using the extra money they get from exploiting these loopholes to help bring down the price of gas for our families. Unlike the underwater geyser in the Gulf, we can shut down these loopholes quickly and permanently when we pass this legislation.” 

The bill has been referred to the Finance Committee, and here's no news as to when the bill will be taken up there.

But let me just say this: If the Senate can't pass a bill that

  • has basically been passed several times in the House
  • would result in billions of taxpayer dollars returning to the treasury at a time when everyone is freaking out about the deficit
  • would be at the expense of an industry whose equipment and practices resulted in the death of 11 American workers and which has been dumping toxic materials into one of the nation's most precious and sensitive wilderness areas for more than a month (not to mention the countless "mini" spills polluting the planet every year)

...well, we may as well just give up and rename the country the United States of Big Oil.

BUZZFLASH NEWS ANALYSIS