The Royalty Boondoggle
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The Royalty Boondoggle
New York Times Editorial
February 3, 2010
In 1995, when oil prices were very low, Congress tried to encourage deep-water drilling in the Gulf of Mexico by giving oil companies relief from some of the royalties they incur for producing oil and gas on public land.
It has never been clear how much new exploration this provision inspired, since steadily rising prices provided plenty of incentive. What is clear is that it has been a good deal for the industry and a bad deal for taxpayers. According to the Government Accountability Office, the provision could allow industry to escape up to $54 billion in legitimate royalties, depending on the price of oil.
Representative Edward Markey of Massachusetts hopes to put things right with a bill that would clarify the law and prevent companies from signing new leases in the gulf until they renegotiate the old ones and pay royalties that are due. A similar bill has been approved three times in the House but has gone nowhere in the Senate.
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