A new report finds that the federal oil and gas systems inability to adapt royalty rates or lease contracts to market conditions could cost taxpayers billions in lost revenue from the oil and gas industry. The report released by the Government Accountability Office (GAO), called for an independent review of the federal system that is responsible for collecting royalties and handling leases with the oil and gas industry.
The report noted that twenty-five years had passed since the last time there had even been a thorough review of the government’s oil and gas fiscal system and raised an important question stating, “Recent large increases in oil and gas prices and industry profits raise obvious questions about whether the public share of oil and gas revenues is appropriate.” Indeed, when the GAO reviewed industry consulting firm data that compared the U.S. oil and gas royalties system to that of 104 other governments, it found that the U.S. government’s share of revenue generated from Deep Water leases in the Gulf of Mexico ranked 93rd lowest.
This report further demonstrates that the federal government should stop giving away federally owned oil and gas resources to the lucrative oil and gas industry. In 2007, Exxon posted the biggest annual profit number reported by any American company ever — $40.6 billion. That same year oil and gas companies earned $75 billion in sales from oil and gas extracted from the Gulf of Mexico. Gas prices have reached $4/gallon. The agency charged with collecting the royalties owed to federal taxpayers for oil and gas resources has confirmed there were ties too close for comfort with the oil industry. What more could the oil and gas industry ask for?
It is time to reign in the agency responsible for overseeing collecting billions in royalties owed to federal taxpayers for oil and gas taken from federal lands and waters, and ensure federal taxpayers receive a fair return for their oil and gas assets.
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