Unfair Share: How Extractors Avoid Paying Royalties for Oil and Gas
|November 19, 2013||Posted by Staff under Corruption|
This 2013 excerpt of ProPublica, Aug 13, is by Abrahm Lustgarten.
In 1982, in a landmark effort to keep people from being fleeced by the oil industry, the federal government passed a law establishing that royalty payments to landowners would be no less than 12.5 percent of the oil and gas sales from their leases.
From Pennsylvania to North Dakota, a powerful argument for allowing extensive new drilling has been that royalty payments would enrich local landowners, lifting the economies of heartland and rural America. The boom was also supposed to fill the government’s coffers, since roughly 30 percent of the nation’s drilling takes place on federal land.
Over the last decade, an untold number of leases were signed, and hundreds of thousands of wells have been sunk into new energy deposits across the country.
But manipulation of costs and other data by oil companies is keeping billions of dollars in royalties out of the hands of private and government landholders, an investigation by ProPublica has found. In some cases, they are being paid virtually nothing at all.
Some companies deduct expenses for transporting and processing natural gas, even when leases contain clauses explicitly prohibiting such deductions.
Significant amounts of fuel are never sold at all – companies use it themselves. Chesapeake Energy deducted marketing fees from payments to a landowner even though the fees went to its own subsidiary. A court ruled that the company was entitled to charge the fees.
Over the last three decades, the government has recouped more than $4 billion in unpaid fees from cheating extractors.
Ed. Notes: While the little guys getting a slice is better than the big guys hogging it all, who really deserves the surplus value of oil in the ground? Nobody put it there. And everybody makes it valuable (by buying so much gasoline, mainly, and some heating fuel, etc). At least Alaska pays residents an oil dividend. And Norway funds a generous government. To know how much of the profit represents the rental value of oil in the ground, perhaps governments should buy stock in oil companies, attend stockholder meetings, get on the boards of directors, and examine the books closely. That’s spell an end to our oiligarchy now ruling the world, and get us closer to a democracy, secure on economic justice.