Federal Land Oil Royalty Debate and Poll
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Oil companies that drill on public lands pay for that privilege in the form of royalties. In 1991, the Department of the Interior’s Mineral Management Service (MMS) started investigations into the process of royalty payments by major oil companies. MMS concluded that oil companies have underpaid taxpayers a total of at least $856 million since 1991. Senator Domenici attached a rider to last year’s Interior Appropriations bill that extended the Hutchison rider through June 1999, and later extended the moratorium on the FY99 Emergency Supplemental Appropriations bill until October 1.
Sen. Kay Bailey Hutchison (R-TX) and Sen. Pete Domenici (R-NM) have attached a rider to the spending bill for the Interior Department and other related agencies that would allow oil companies to continue to underpay royalties to the federal government when those companies drill oil on public lands. The Department of the Interior (DOI) estimates that major oil companies currently are underpaying oil royalties when drilling on public lands by about $66 million annually, for a total of $856 million since 1991. The Hutchison-Domenici rider prevents the DOI from collecting royalty payments from delinquent oil companies until June 2001.
Both proponents of this legislation have received substantial campaign donations from the oil and gas industries. Sen. Hutchison accepted more money in campaign contributions, $1.2 million, from the oil and gas companies than any other industry during the past five years, according to federal records. Likewise, federal records on Sen. Domenici’s campaign reveal that oil and gas industries were one of his top contributors with $186,000.
Fact 3 9-9-99
Oil-state lawmakers have argued the new rules would amount to an unfair tax on oil producers at a time when the industry already is facing troubled economic times. Congress for two years has blocked the Clinton administration from implementing the royalty change.
Democrats blocked the amendment and Republicans were forced to temporarily set it aside. An attempt will be made next week to cut off debate as Democrats threatened a filibuster. Hutchison's amendment has the Republican majority support. Republicans will need 60 votes to break the filibuster, or the amendment will have to be withdrawn.
Sen. Kay Bailey Hutchison, Republican of Texas, She has criticized the new royalty rules, which are set to take effect at the end of the month, as a ``back door'' tax hike on oil companies.
Sen. Barbara Boxer, a California Democrat, has accused oil companies of ``cheating'' taxpayers by underpaying royalties that are used to fund various state and federal government programs, such as education, parks and water conservation.
“Oil on federal land is a taxpayer asset that should be managed in a way that provides a fair return to taxpayers. The Hutchison amendment would risk the further loss of millions of dollars owed to the taxpayer. Oil companies should pay their fair share of royalties when they drill oil on lands owned by the federal government and by Native American Tribes,”
The U.S. Senate voted 9-23-99 to delay for one year new federal rules requiring oil companies to pay higher royalties on crude pumped from public lands. In a 51-to-47 vote, lawmakers agreed to add an amendment to the Interior Department's $14.1 billion spending bill to block the department from spending money for one year to implement the higher royalty rules due to begin on Oct. 1. Republican Sen. Kay Bailey Hutchison of Texas, which sponsored the amendment, argued the rules amounted to a tax increase on oil companies and that would be passed on to consumers in the form of higher gasoline prices. ``Let's not let a federal agency raise the price of gasoline at the pump,'' she said.
``We're out here on the floor because we want people to know ... these oil companies have been cheating,'' declared Sen. Paul Wellstone, D-Minn. Critics of the current system say oil companies now undervalue the oil by as much as $4 to $5 a barrel - as much as $68 million a year, according to Interior Department estimates. Boxer maintained that the oil companies themselves have acknowledged manipulating the numbers when calculating the value of the federal oil and gas. A half-dozen oil companies in a lawsuit being heard in Texas have settled to avoid trial, paying $230 million because they allegedly undervalued oil, she said.