more GOP kick backs?

[tngbmt]

kick back program initiated
NEW YORK (Reuters) - The government may waive up to $7 billion in royalty payments from companies pumping oil and natural gas on federal territory in the next five years this is when they're having record earnings, oil stay above $50/bbl and we have high deficits. this type of action will tear this party apart.

[bluefin]

I saw that too. Must be more to the story. Readers?

[Farmer Jim]

Well this isn't quite the way that the press portrayed it. SURPRISE, SURPRISE!!

I think most on the board know that I am no fan of what of big oil companies have become over the past 10 years or so. But fair is fair and this is not something that was just done or that we should correlate to any behaviors that resulted in their recent profits. Royalty relief (producing oil from federal lands without having to pay royalties to the government) was part of the 1996 energy bill proposed by the Clinton administration and passed by Congress. It was not across the board, but was limited to some deepwater Gulf areas that were economicaly marginal for development at 1996 oil prices.

Improved technology and more developed infrastructure would probably make them viable projects today even at those prices, but at that time there was no way these properties would have been explored and developed without something else on the plus side of the ledger. That "something" could have been time (improved technology and more infrastructure in place), higher prices, tax incentives, or royalty relief. The Clinton administration and Congress chose royalty relief. Probably a better course would have been tax incentives, but that would have had a more immediate impact on government coffers and politicians always want to put off paying the piper until the next guys come into office. The royalty relief didn't cost anything out of pocket and delayed the forgoing of revenue longer than tax incentives would have.

This wasn't really a bad program and it resulted in the development of some prospects in a more rapid manner than would have happened otherwise, which was indeed beneficial to the nation. Of course anybody with half a brain would have considered the possibility that oil prices could change dramatically and would have tied the subsidies to the price of oil in 1996 and then included provisions to factor the royalties appropriately if oil prices went up more than a moderate amount. The oil companies would have still done the same thing they did in terms of drilling these deepwater prospects and the government would have ensured that any windfall related only to price changes became the public's money.

But, having half a brain would more than double the intellect of most politicians, so now the oil companies are going to reap a substantial windfall that really should be going to the federal treasury. However, this has nothing to do with the Bush administration and one really shouldn't fault the oil companies either. If something similar happened to any of us in our personal life we certainly would not write Uncle Sam a check just because congress was stupid and circumstances changed in our favor.

I guess Congress could now pass another bill changing the program, but that would seem to be to be a bad precedent and could open the door to all sorts of very dangerous meddling by people with less than whole brains. The lesson here needs to be "do it right the first time".

It may be annoying that this is happening while the oil companies are making record profits and while Exxon alone has revenues greater than 85% of the world's nations, but it really is unrelated to anything Big Oil or the Bush Administration has done. If a scapegoat is needed for this one, it should be the Clinton administration and whoever your Senator and Representative were in 1996.

[Snagged]

Thank you Jim.

[tngbmt]

thanks for the clarification F/J ..
however well intended the program was back then, it isnt appropriate now and no one will be blame but this adminstration.