Markey: New Analysis Confirms Energy Bill Would Ensure Recovery of Oil Royalties

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Contact: Select Committee, 202-225-4081

Markey: New Analysis Confirms Energy Bill Would Ensure Recovery of Oil Royalties

Markey Legislative Language is Insurance Policy for Taxpayers Against Oil Lawsuits

WASHINGTON (November 9, 2007) – At the request of Rep. Edward J. Markey (D-Mass.), a new analysis released today by the nonpartisan Congressional Research Service (CRS) found that legislative language in the energy bill currently being considered by the Congress would ensure that billions rightfully owed in oil royalties will be paid to American taxpayers regardless of the outcome of lawsuits by big oil.

Congress is currently considering two energy bills passed by the House and Senate that would reduce oil dependence and cut global warming pollution. The current House energy bill contains the Royalty Relief for American Consumers Act, originally drafted by Rep. Markey, which would recover an estimated $10 billion in unpaid royalties from Gulf of Mexico oil leases granted in 1998 and 1999 that erroneously allowed for royalty-free drilling regardless of increasing oil prices.

Oil companies are also suing the federal government in an attempt to also avoid paying royalties on leases issued in 1996, 1997 and 2000. However, CRS stated in today’s memo that the language in the energy bill, if signed into law, would not only recover the unpaid royalties from the 1998-1999 leases, but would also protect taxpayers from losing an additional $60 billion in oil royalties even if oil companies prevail in their lawsuit.

The memo can be found on the Select Committee website HERE.

“Since they will pay either way, the oil companies should lift their lawsuits and pay their fair share of royalties to taxpayers,” said Rep. Edward J. Markey, Chairman of the Select Committee on Energy Independence and Global Warming. “The president must also drop his veto threat against the current energy bill to ensure these funds are paid.”

The White House sent a letter to House Speaker Nancy Pelosi in October saying President Bush would veto the energy bill if he felt it singled out the oil industry.

In the research memo, CRS notes the passage of Rep. Markey’s language in the current energy bill would ensure recovery of the royalties. The letter says: “If Congress does wish to ensure that royalties on all leases issued pursuant to section 304 of the [Deep Water Royalty Relief Act] between 1996 and 2000 are limited by both price and volumetric thresholds, it could do so by passage of the proposed Royalty Relief for American Consumers Act of 2007 as it is currently worded in Sections 7501-7505 of H.R. 3221.”

It also notes that even if current lawsuits by oil companies are upheld, the legislative language in these sections would mean drilling activities by the oil companies would be considered “covered leases” and, any company that holds a lease issued in the years between 1996 and 2000 “would be ineligible for future oil or natural gas production leases in the Gulf of Mexico. . .until that entity either renegotiates the lease in question” or pays the royalty fees.

CRS had previously concluded that there are no constitutional impediments to the royalty recovery language authored by Rep. Markey.

“The law is clear, the legislation is clear, and the responsibility of these oil companies is clear—they must pay royalties on this oil,” continued Rep. Markey.

Earlier this week, Rep. Markey led a group of nine members of Congress to call on the Department of Justice to immediately appeal last week’s federal district court decision in favor of the oil company, Kerr-McGee Oil and Gas (now owned by Anadarko Petroleum). In the letter, Rep. Markey and the other members urge the Department of Justice to “dedicate the highest-level personnel and the requisite resources to the appeal”, stating that Congress “never intended to restrict the Department of the Interior’s ability to issue deepwater leases that require the payment of royalties when the price of oil is high.”

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