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Monday, January 23, 2006

Stuffing the pockets of the energy industry since 2001
Posted by Jill | 6:44 AM

Isn't it funny how George Bush loves to get out in front of friendly audiences to tout ever-more tax cuts and say "It's YOUR money?"

Well, publicly-owned land is OUR land, too, and the government hasn't thought it appropriate to raise the royalty rates it receives from private companies who drill for natural gas on these lands:

At a time when energy prices and industry profits are soaring, the federal government collected little more money last year than it did five years ago from the companies that extracted more than $60 billion in oil and gas from publicly owned lands and coastal waters.

If royalty payments in fiscal 2005 for natural gas had risen in step with market prices, the government would have received about $700 million more than it actually did, a three-month investigation by The New York Times has found.

But an often byzantine set of federal regulations, largely shaped and fiercely defended by the energy industry itself, allowed companies producing natural gas to provide the Interior Department with much lower sale prices - the crucial determinant for calculating government royalties - than they reported to their shareholders.

As a result, the nation's taxpayers, collectively, the biggest owner of American oil and gas reserves, have missed much of the recent energy bonanza.

The disparities in gas prices parallel those uncovered just five years ago in a wave of scandals involving royalty payments for oil. From 1998 to 2001, a dozen major companies, while admitting no wrongdoing, paid a total of $438 million to settle charges that they had fraudulently understated their sale prices for oil.

Since then, the government has tightened its rules for oil payments. But with natural gas, the Bush administration recently loosened the rules and eased its audits intended to uncover cheating.

[snip]

Royalties for natural gas have climbed sharply in the last three years. But while prices nearly doubled from 2001 to 2005, the $5.15 billion in gas royalties for 2005 was less than the $5.35 billion in 2001. When oil and gas are combined, royalties were about $8 billion in 2005, almost the same as in 2001.

Because much of the information about specific transactions is kept secret, it remains unclear to what extent, if at all, the weakness in royalty payments stems from deliberate cheating or from issues with the rules themselves.

But one major producer, Burlington Resources, admitted to shareholders last year that it might have underpaid about $76 million in gas royalties in the 1990's. And in Alabama, a jury ruled in 2003 that Exxon had cheated on $63.6 million worth of royalties from gas wells in state-owned waters. The jury awarded $11.9 billion in punitive damages, which a judge later reduced to $3.5 billion. Exxon disputes the charges and is appealing the verdict.

The possible losses to taxpayers in gas could be even higher than the losses tied to the scandals over oil royalties. For one thing, natural gas production on federal land is worth twice as much as oil.

Moreover, the Interior Department has scaled back on full audits, pushed out a couple of its more aggressive auditors and been criticized by its own inspector general for the audits that it did pursue.


This is just another way the Bush Administration exempts its friends in the energy industry from having to pay its fair share. If, say, a poor family in Paterson, NJ didn't pay its rent increases, it would be out on the street. But underpayments of what are essentially rents on public lands are perfectly OK if the companies are Bush's friends in the energy industry.
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