House turns back Markey plan to recover oil royalties

The House rejected an amendment Friday night aimed at pressuring oil-and-gas producers to renegotiate offshore leases that currently allow them to avoid paying federal royalties even when energy prices are high.

Lawmakers voted 174-251 against Rep. Ed Markey’s (D-Mass.) amendment to the fiscal year 2011 spending bill.

{mosads}Markey’s plan was designed to ensure royalty payments from companies holding deepwater Gulf of Mexico leases issued between 1996 and 2000 – contracts that currently provide waivers from the payments.

Markey’s plan would have prevented the Interior Department from issuing new leases to companies holding the 1996-2000 leases, in order to get the companies to accept “price thresholds” on those leases that end the waivers when oil and natural gas prices exceed certain limits (we wrote more about Markey’s plan here).

The Massachusetts Democrat, speaking on the House floor earlier Friday, had urged colleagues to back the plan, which would have prevented Interior from using fiscal year 2011 funding to issue new leases.

He cited estimates that the royalty waivers could ultimately cost the government over $50 billion in forgone payments from oil companies.

“We all agree that we have to do some serious work to reduce the deficit,” said Markey, a longtime foe of oil companies. “With oil prices at $90 a barrel, we do not have to be allowing them to drill on public lands for free and keep all of the profits for themselves and give nothing back to the American taxpayer.”

But Republicans attacked the plan, warning it would limit energy development.

“This is about closing off more domestic sources of energy production at a time when the Middle East has never been more volatile,” said Rep. Steve Scalise (R-La.).  “You might as well just call this the OPEC protection amendment.”

 Rep. Mike Simpson (R-Idaho), who heads the subcommittee that controls Interior spending, said that “forcing companies to renegotiate the leases would be a violation of contract law and would be challenged in court.”

Roughly a dozen Republicans voted for Markey’s amendment, while about two-dozen Democrats opposed it.

The amendment was the latest skirmish in a years-long dispute over royalty waivers made available in a mid-1990s law that provided incentives for costly deepwater drilling in the Gulf.

Under the royalty relief program, the waivers apply until prices exceed a pre-determined threshold.

But in a now-infamous and expensive goof, the Department of Interior left the price ceilings out of leases issued in 1998 and 1999, thereby allowing royalty-free production at any oil and natural-gas price.



An appellate court decision in early 2009 found the Interior Department cannot apply the price-based limits on royalty waivers for any leases issued between 1996 and 2000.

The Government Accountability Office estimated in 2008 that without the price ceilings on leases issued between 1996 and 2000, foregone federal royalty revenue could reach $53 billion over 25 years.

Markey bashed Republicans in a statement after the vote.

“Republicans once again sided with BP, Exxon and the oil companies, not with the American taxpayer and the poorest Americans most in need of help. This legislation focuses on just the kind of special interest loophole that should be closed before we open attacks on programs for the poorest Americans,” he said.