May 18, 2006- Statement on the Hinchey-Markey Interior Appropriations Amendment on Royalty Relief
"Mr. Speaker, I rise in support of the Hinchey-Markey amendment that would help put an end to unlimited royalty free-drilling on public lands by big oil companies. Oil companies pay a fraction of the value of oil and gas produced on public lands as a royalty to the federal government. However, right now, we currently give some companies royalty relief no matter how high the price of oil goes. At $70 a barrel, $100 a barrel, or higher, we will continue to provide taxpayer funded subsidies to big oil companies to drill for oil. Subsidizing big oil companies to drill for oil at these prices is like subsidizing a fish to swim – It just doesn’t make any sense.
The Hinchey-Markey amendment tries to address this royalty free-drilling by barring any of the funds appropriated in this Act from being used to issue any new oil or natural gas production lease for drilling on the Outer Continental Shelf to any person who is a lessee under an existing OCS oil and gas production lease that fails to include limitations on royalty relief based on market price. This restriction would give the oil companies that hold leases allowing them to drill for free a strong economic incentive to renegotiate these leases with the federal government. Essentially, the amendment confronts the oil company with a choice: They can keep their existing leases but be barred from bidding on new contracts, or they can agree to renegotiate these leases to include a suspension of any royalty relief at times when market prices are high, and then be able to participate in the bidding for new leases.
The Republican Party has already taken one step to make sure that these taxpayer subsidies to big oil stay in place. Yesterday, on a party line vote, the Republican Members of the Rules Committee voted against a Democratic amendment that would have protected language Democrats on the Appropriations Committee had successfully inserted into this bill to set a hard price threshold for the suspension of royalty relief in the future. This language was derived from H.R. 4749, the “Royalty Relief for American Consumers Act,” which I introduced earlier this year. The Republicans on the Rules Committee voted to allow that language to be struck from this bill today.
Why is the Hinchey-Markey amendment needed?
While the Secretary has the authority to set price thresholds based on market price set by the Interior Department, we have a very serious problem with some of the oil and gas leases that were issued several years ago. According to the Interior Department, there are 576 oil and gas leases that were issued back in 1998 and 1999 that remain in effect and which contain absolutely no price threshold above which royalty relief gets cut off. Most of these leases haven’t even begun production yet, meaning that there is a huge financial boon still to come for the American taxpayers.
The biggest lie about the royalty relief program is that it doesn’t cost anything. We are beginning to learn just exactly how much this program is costing American taxpayers. The Government Accountability Office has issued a draft study concluding that the federal government and the American people could lose $10 billion over the next 25 years from these leases that have no price threshold for the suspension of royalty relief. In addition, the losses could total as much as $60 billion more if Kerr McGee is successful in a lawsuit against the federal government.
America’s consumers are being tipped upside down and having money shaken out of their pockets by Big Oil companies. Meanwhile, these companies are making the greatest profits we have ever seen in the history of the world.
President Bush himself, just over one month ago stated that oil companies don’t need incentives to drill when the price of oil is $55. Well, the President is right. Big oil companies don’t need incentives at $55, and they certainly don’t need them where we are now, at $70 a barrel or as prices go even higher. But the Republican Majority continues to oppose any efforts to end royalty relief.
How do Big Oil companies spell relief?!? G.O.P.
The Republican Majority continues to move one do-nothing energy bill after another through this House in an effort to appear as though they are helping American energy consumers. Well if this Republican Congress is serious about helping American consumers who are being crushed under $3 gas and $70 oil, this is the moment. The American people are watching today to see if the Republican Majority will vote once again to put energy companies ahead of energy consumers.
I urge adoption of the Hinchey-Markey amendment in order that we can bring these oil companies back to the negotiating table and recoup some of the billions we stand to lose as American consumers are bearing the brunt of high oil and gas prices. It is time for the big oil companies to pay their fair share and I urge adoption of the amendment. "