One of the first lessons we learn as kids is that taking something without permission that belongs to somebody else is stealing.  Executives at the Anadarko Petroleum Corporation, the second-largest oil and natural-gas producer in the U.S., seem to have never learned this important lesson.  Last week, while oil prices were nearing $100 a barrel, the oil services giant won a court decision arguing that it doesn’t have to pay taxpayers for oil and gas it removed from federal waters.

Oil and gas companies lease taxpayer-owned lands and waters from the federal government to drill for oil and gas.  In return for this right, they give taxpayers a percentage of the revenue generated from the oil and gas that is extracted. The $7 billion in annual oil royalty payments are the nation’s third largest source of revenue.

So how can a company get away with not paying the royalties they owe to taxpayers? By taking advantage of a loophole created by Congress.

In the early 1990s, when oil prices were $15- $20 a barrel, lawmakers were concerned that oil companies didn’t have enough financial incentive to continue exploring for oil in the outer continental shelf in the Gulf of Mexico.  Lawmakers decided that for leases signed between 1996 and 2000, oil companies would pay royalties only if the price of oil exceeded the $34 a barrel threshold. (The notable exception are leases signed in 1998 and 1999, which, inexplicably, didn’t include any threshold).

Anadarko (then Kerr-McGee) saw this loophole and decided to drive a tanker through it.  The companies’ lawyers argued that price thresholds were illegal, and that regardless how high prices rose, the Department of Interior (DOI) could not use them as the basis for assessing royalties.  Their argument is simple: even as prices rise, royalties cannot be assessed on any lease signed under the 1995 legislation.  The Federal District Court agreed.

If oil and gas companies are allowed to avoid paying royalties on these taxpayer-owned leases, the impacts on the Treasury will be devastating.  The Government Accountability Office estimates the value of royalties from these leases to be as high as $60 billion dollars.  Another government estimate put it as high as $80 billion (pdf).  Leases in the Gulf held by Exxon Mobil, ConocoPhillips, Shell and Chevron have already produced $1.2 billion in royalty payments to the federal Treasury that would have to be paid back.

All of this for a royalty incentive the oil and gas industry simply doesn’t need. The President, dozens in Congress and even representatives of the oil and gas companies themselves have gone on record saying oil companies do not need incentives given the record high prices.

The administration and both the House and Senate have weighed in on the prospect of this multibillion dollar giveaway.  Congressional leadership and others believe that requiring oil companies with royalty-free contracts to pay a fee or renegotiate their leases will ensure American taxpayers get their money.  Senator Jeff Bingaman (D-NM) and several Senate colleagues have proposed an excise tax on oil and gas companies operating in the Gulf that may ensure companies pay up.  The administration may appeal the court’s decision.

If the Anadarko decision isn’t challenged legally or legislatively, tens of billions of dollars of taxpayer-owned assets will be given free of charge to oil and gas companies at a time when prices are at or near record highs.  Enough is enough.  Congress and the administration must roll up their collective sleeves and work together to ensure that these oil giants pay for the resources they take from taxpayer-owned land and waters.