Oil companies get rich off of subsidies

Goodness, that article certainly does try to tie it all to Bush, Republicans, and the current government, but the vast majority of these waived royalties are written into contracts signed by the Clinton administration, mostly in 1998 and 1999.

Oil was really cheap in 1998. Adjusted for inflation, it was actually the cheapest it had been since 1948. Congress and the Clinton administration wanted to encourage drilling in deep waters of the Gulf of Mexico where extracting oil is considerably more expensive, and wasn't worth the extra expense in 1998. So, to sweeten the deal, the Clinton administration waived the royalities on the contracts signed during those years. However, they managed to not include a price cap on which the royalities would apply.

Now, 8 years later, the new wells are finally about to come on line. And since the waivers are in the contracts, the federal government is legally obligated to waive the royalities.

So, if you want to blame it on someone, then blame it on Clinton. Bush and the current Congress can't break the contracts that were signed by the Clinton administration in 1998 without throwing away the legal system.

Also, to say that these are subsidies paid for by the taxpayers is more than a little off. None of your tax dollars are paying for this. While it is true that the royalties that are being waived would be revenue for the federal government if they were not waived, it is also true that we wouldn't be receiving them over the next 5 years or so anyway, because without the waivers the wells wouldn't have been built and wouldn't begin pumping this year and therefore the royalities wouldn't have been paid to the federal government because the oil would remain in the ground.

However, it is true that prices are currently high enough that if the contracts had not been granted 8 years ago, they would problaby be granted today, without royalty waivers, and therefore the federal government would have seen the revenue 8 to 10 years from now.

 

Time for a letter writing campaign. If each of us gets 10 others to contact congress and tell them to put a stop to this subsidy we can start a massive write-in campaign to kill this bill and all like it. Have your friends write in or call and contact ten other friends.

Let congress know that you are mad as hell and not going to take it anymore.

 

Most of this is acient history. You have to actually read the article and try to see past the NY Times slant.

The waivers were written into contracts 8 or more years ago. The were incentives for oil companies to invest in off-shore drilling that didn't actually make economic sense because off-shore drilling is expensive, particularly in the deep waters that these contracts were for, and back then, oil was really, really cheap. So, Congress and the Clinton administration waived the royalties on the oil pumped from these fields in order to entice the oil companies to invest in oil wells.

It takes nearly a decade for oil wells to be built. These wells are finally about to come online. It just so happens that oil is really, really expensive right now, so the waived royalities that were written into contracts when oil was really really cheap have turned out to be a very good thing for the oil companies.

These waivers were written into the contracts. The government can't just break the contracts because they don't like them anymore.

 

Yeah but the Times article makes it sound like it all came to be last summer. It maybe that something additional happened last summer, but it's so hard to tell from what seemed to me to be a very poorly written article.

By the time you get to the fourth paragraph and the sentence "But last month, the Bush administration confirmed that it expected the government to waive about $7 billion in royalties over the next five years, even though the industry incentive was expressly conceived of for times when energy prices were low.", you are lead to believe that the $7 billion in waived revenue is the result of the Bush administration and whatever happened last summer.

It takes some careful reading, or existing knowledge of the issue, to overcome this initial bias and realize that at least $5 billion of the $7 billion was the result of incentives placed in contracts 8 years ago when oil was really cheap.

 

Agreed this is not a partisan issue. And agreed that 10 yrs ago, the Republicans controlled congress. The thought that oil companies were not hugely profitable 10 yrs ago, regardless of less expensive oil, is nonsense.

Going forward, to the next round of contracts, this is an uneccessary subsidy. These funds could go a long way towards building alternative energy infrastructure and conservation programs. If Mr. Bush wants to address our "addiction to oil", this would be a good place to start on the cure. The cynicism of this sickens me.

 

"Time for a letter writing campaign. If each of us gets 10 others to contact congress and tell them to put a stop to this subsidy we can start a massive write-in campaign to kill this bill and all like it. Have your friends write in or call and contact ten other friends.

Let congress know that you are mad as hell and not going to take it anymore. "


This could work provided we attach "campaign contribution" checks (not to be confused with bribes) that are greater in sum total than those the oil industry can write. Checkbooks ready, everyone?

 

Oh, c'mon, stop looking under the bed for the Big Bad Oil Company Boogieman.

Before you all go into hysteria about the oil companies not paying royalities on Gulf Oil at a time when oil prices are high, you need to look back at how it came to be, and why it is happening now.

Here's a few questions and answers to lead you to the truth.

Q) Why did Congress and the Clinton administration in the late 90's offer royalty free contracts to oil companies for Gulf oil fields?

A) Because oil companies were not interested in new exploration in the Gulf and the oil-based economies of the gulf states were suffering because of the lack of investment.

Q) Why were oil companies not interested in new exploration in the Gulf?

A) Because the new oil fields were in deep water, making oil exploration expensive. Oil was real cheap in the 90's and there were plenty of new oil fields in other parts of the world that were much more cost effective.

Q) Why are the royalities being waived now, when oil prices are at their peak?

A) Because they were written into the contracts back in the late 90's and the government is legally bound to abide by them. It takes nearly a decade to build oil wells in a new oil field, particularly one in deep water, so the oil wells covered by the contracts handed out in the late 90s are just now beginning to come online.

Congress and the Clinton Administration offered these royalty free contracts inorder to boost the economies of the Gulf States at a time when they were in trouble because no one wanted to invest money into Gulf oil fields. Someone (in the Clinton Administration) made a mistake and left out the price thresholds that would have cut off the waivers at a certain price. The oil companies got lucky and oil prices skyrocketed a year or two prior to their oil wells coming online. Therefore, the oil companies are saving billions in royalities on oil pumped from specific wells in the Gulf. However, these wells wouldn't have existed today if the royalty free contracts were not granted, so you can't say that the royalty waivers are coming out of the tax payer's pockets.

However, it is valid to say that with 20/20 hindsight, we see that we might have been able to collect these royalities in another 10 years or so, if the contracts were granted today instead of 8 years ago. But then, you would also have to consider the potential loss in revenues from the failing Gulf Coast economies that would not have gotten a boost if the contracts weren't issued 8 years ago.

 

Let's face it: if government wants to throw money at Business, Business would be foolish not to take it.

For instance, development and building of (safer) nuclear power plants.
Industry will not take on the risk of building/investing in, a plant and then fail to get the operating licenses from the NRC. So they will wait until the feds cut them a deal...Congress will pay to build the new plants. The NRC will review and pre-approve the plans and HIRE the power companies to build the plants, for the govt. Then the NRC will approve the licenses for the finished plant and then the businesses will take over and run the plants. And rake in the profits.

The industry would be foolish to take on the financial risks involved in building updated, modern, nuclear power plants without getting federal backing and involvement, up front.

IF (big if) we want to have access to nuclear power, we have to push Congress and the White House to get on that horse. It would take at least five, maybe ten, years for any new nuclear power plants to come on line so we should start pushing the issue now.

Would the power industry be making gobs of money, ten years from now, off the federally funded plants? Oh heck, yeah. But we won't get nuclear power any other way.

 

Marlin, thanks for the thoughtful reply. You make a good point. I'll do a bit of research before commenting. But I do think you should stop pointing to the Clinton administration when the crucial clause was omitted by a decidely Republican congress, regardless of who submitted it or who benefited.

 

Once again partisian hacks blame Clinton. Y'a know, at least Regan said 'the buck stops here'. It is really getting pathetic that lil Georgie has no culpability for ANYTHING and it is ALWAYS Clinton's fault. Imagine how this excuse makes republicans look time and time again. It gets harder and harder not to blame ALL republicans when they mindlessly blame others for all ills, but attempt to take credit for any possible good deeds. Even sheeple can see through this one it is so transparent. Use your own mind and stop using republican talking points. They make you personally devoid of any morals.