Collecting Natural Resource Values

Taxpayers for Common Sense is the best organization that monitors excessive government spending. Here is their latest news update.

Budget Negotiations May Signal End to Royalty Rip-Off; Time for Oil Industry to Pay the Piper

It seems that the end-of-session budget wrangling and Congress' eagerness to get out of Washington earned taxpayers at least one victory in the recently passed multi-billion dollar omnibus spending package.

Language in the bill would substantially weaken a provision by Senator Kay Bailey Hutchison (R-TX) that has allowed oil companies to underpay for the right to drill on public lands. The bill requires implementation of a rule by March 15, 2000 that would force oil companies to pay royalties based on the fair market value of the oil rather than their own voluntary internal pricing system -- a change that will save taxpayers millions.

Currently, major oil companies underpay royalties by an estimated $68 million per year according to the Department of the Interior's Minerals Management Service (MMS.) Of the payments that are made, the lion's share goes into the Treasury. The rest is divided among several programs: public education, historic preservation and the Land and Water Conservation Fund.

MMS has been attempting to implement the new rules since 1997, but Sen. Hutchison has stymied its efforts.

In May 1998, Senator Hutchison successfully attached a rider to a disaster relief bill that delayed implementation of any new rule until September 30, 1998. Sen. Hutchison delayed implementation of the MMS rule last year with another rider and yet again earlier this year. All told, the delays have cheated taxpayers out of over $130 million.

This year's budget negotiations between the Administration and Congress forced appropriators to significantly weaken Sen. Hutchison's provision: The moratorium on the new rule was shortened from September 2000 to March 15, 2000 and the House and Senate subcommittee chairmen signed a letter stating that they would oppose any attempts to further delay MMS' implementation of the new rule.

"It is a known fact that the oil companies have been undervaluing the worth of this oil, thereby cheating the taxpayers of hundreds of millions of dollars. This has been a struggle for years, but it appears as if we have finally won," said Sen. Barbara Boxer, D-CA, who led with Rep. Carolyn Maloney (D-NY), the congressional efforts for oil royalty reform.

For the last three years, Taxpayers for Common Sense has fought for royalty reform. Although taxpayers still lose several million between now and March, the agreement is a significant victory in the oil royalty standoff.

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For more information on oil royalties, contact Cena Swisher at (202) 546-8500 x108 or e-mail cena@taxpayer.net ; TCS is at www.taxpayer.net

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