Washington (November 20, 2019) – Senator Edward J. Markey (D-Mass.), and Chair Raúl M. Grijalva (D-Ariz.) and Rep. Alan Lowenthal (D-Calif.), Chair of the Subcommittee on Energy and Mineral Resources today introduced the Stop Giving Big Oil Free Money Act, legislation repealing a loophole in the Deepwater Royalty Relief Act of 1995 (DWRRA) that allowed oil and gas companies to avoid paying approximately $18 billion in royalties to the American people between 2000 and 2018. As recently detailed by the New York Times, the Newt Gingrich-era law exempts certain offshore leases from having to pay federal royalties, which a U.S. Government Accountability Office (GAO) report – released by Chair Grijalva in October – finds has come at a high cost to the public.
“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,” said Senator Markey, Chair of the Senate Climate Change Task Force. “It’s time to stop treating oil and gas companies like tax royalty and close this free drilling loophole once and for all.”
“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,” said Chairman Grijalva.“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.”
“The American public deserves a fair return on any extraction of oil and gas in federal waters,” said Rep. Lowenthal. “These resources are public resources, and the recent GAO report details how the Department of the Interior practices regarding these resources have shortchanged the public by billions of dollars. This legislation is an important and simple fix to these unfair practices. It will ensure that the Interior Department improves their policies and practices to ensure the government provides a fair return to the American public for the use of public lands and waters.”
In 1995, Congress passed DWRRA to incentivize oil and gas exploration specifically in “deep water” areas – defined as more than 200 meters of depth – in the Gulf of Mexico that might otherwise be uneconomical to explore, provided the price of oil stayed below a certain threshold. Despite clear Congressional intent, industry successfully sued and claimed that the law was written to guarantee royalty reductions regardless of the price of oil.
GAO found that applying that loophole across the board so far has meant an $18 billion windfall for oil companies, with tens of billions of dollars in likely future losses to the public expected unless Congress closes the loophole.
Currently, 20 percent of producing leases in federal waters in the Gulf of Mexico pay no royalties, and many of them are likely to continue producing for decades. The corporations that own the bulk of these leases are some of the largest and most profitable oil companies in the world, including Chevron, Occidental Petroleum, Equinor (formerly Statoil) and Shell.
A copy of the legislation can be found HERE.
The legislation prevents the Secretary of the Interior from issuing new offshore oil and gas leases to any company that already holds one or more royalty-free leases unless the company renegotiates them to include a price threshold, as intended when DWRRA was passed.