“Stop Giving Big Oil Free Money Act”

“Stop Giving Big Oil Free Money Act” would end a loophole that allowed oil and gas companies to avoid paying $18 billion.

Should a 1995 financial break to incentivize offshore drilling remain 24 years later?

Responsible Community’s Position:

With huge deficits at the Federal level, we are not able to afford continued tax breaks that aren’t necessary.

The United States now has excess oil production.

The temporary reprieves that were intended to be in the act were “accidentally” omitted, so the reprieves should be removed.

Oil company profits for 2018 (latest available) was $28 billion, they hardly need incentive to drill for oil.

This bill should be supported in both the House (H.R. 5186) and the Senate (S 2906).

Context

The Deep Water Royalty Relief Act of 1995 — part of a larger 1995 law dealing with energy production — attempted to spur oil drilling in the Gulf of Mexico, by offering companies temporary reprieves from the 12% royalty they were supposed to pay on the produced oil.

However, a clause supported across the aisle — which would have instituted the royalty payments if oil and gas prices exceeded a certain level — was accidentally omitted. Those price thresholds were exceeded years ago. Since then about $18 billion in would-be royalties were never paid.

What the legislation does

The Stop Giving Big Oil Free Money Act would close this quarter-century-old loophole, by banning the Interior Department from issuing any new offshore drilling lease to a company which already holds a royalty-free lease.

The ban would only be lifted for a company if they negotiate their existing lease to a new price threshold, presumably to begin paying royalties on it.

The House version was introduced on November 20 as bill number H.R. 5186, by Rep. Raúl Grijalva (D-AZ3). The Senate version was introduced the same day as bill number S. 2906, by Sen. Ed Markey (D-MA).

What supporters say

Supporters argue the legislation closes a loophole that neither party intended nor would have supported at the time.

“This money belongs to the American people, and some of the most profitable companies in the world are keeping it for themselves because they think they’re entitled to it,” Rep. Grijalva said in a press release. “This money should be building roads and providing health care for veterans. We have to decide once and for all whether the public or fossil fuel corporations really own our lands and waters.”

“Big Oil gets handout after handout straight from the pockets of the American people, all to fuel our fossil fuel addiction that is driving the climate crisis,” Sen. Markey said in the same press release. “It’s time to stop treating oil and gas companies like tax royalty and close this free drilling loophole once and for all.”

What opponents say

Opponents counter that the status quo provided a huge boost to the energy industry, to the point that the U.S. is now almost completely self-sufficient for energy.

The original 1995 law “was a bipartisan program signed into law by President Clinton that jumpstarted the U.S. offshore oil and natural gas industry,” National Ocean Industries Association President Erik Milito said in a statement.

“Between 2000 and 2018, a stronger U.S. offshore industry generated more than $122 billion for the Federal government through high bids, royalties and rents and helped unlock a higher quality of life through affordable and reliable energy,” Milito continued.

“Instead of sending jobs, economic growth and energy security abroad, Washington, D.C. policymakers should find new solutions that help America remain the offshore energy leader.”

Odds of passage

The House version has attracted one Democratic cosponsor, Rep. Alan Lowenthal (D-CA47). It awaits a potential vote in the House Natural Resources Committee, where Rep. Lowenthal is the Chair of the Subcommittee on Energy and Mineral Resources, making a vote there likely.

The Senate version has not yet attracted any cosponsors. It awaits a potential vote in the Senate Energy and Natural Resources. Odds of passage are low in the Republican-controlled chamber.

This article was written by GovTrack Insider staff writer Jesse Rifkin.

Links

https://govtrackinsider.com/stop-giving-big-oil-free-money-act-would-end-a-loophole-that-allowed-oil-and-gas-companies-to-d7dcfcc9eefc

https://www.govtrack.us/congress/bills/116/hr5186

https://www.govtrack.us/congress/bills/116/s2906

https://www.govtrack.us/congress/members/edward_markey/400253

https://www.govtrack.us/congress/members/raul_grijalva/400162