Press ReleaseFeb 26, 2013
Markey Report: Oil Companies Pocketing Billions of Dollars in Free DrillingIssues: Oil
Contact: Eben Burnham-Snyder, Rep. Ed Markey, 202-225-2836
Taxpayers, Congress Squandering up to $40 Billion as Nation Stares Down Sequester, Gas Prices Hit Highs; Report Details Company-by-company Windfalls
WASHINGTON (February 26, 2013) – A new report, released today by Rep. Ed Markey (D-Mass.), shows how more than 100 oil and gas companies are drilling in U.S. waters in the Gulf of Mexico without paying royalties to the American people. Nearly 40 percent of these active royalty-free leases are fully or partially owned by foreign governments. The report shows for the first time how much each of these companies is making in free drilling from the U.S. taxpayers.
The royalty breaks enjoyed by these companies have already cost $11 billion in forgone revenue, and are expected to cost more than $15.5 billion over the next decade – exceeding previous estimates by the Interior Department -- and may ultimately reach a total of $40 billion as oil and gas production rises, according to previously undisclosed Interior Department data obtained by the Democratic staff of the Natural Resources Committee.
The report released by Rep. Markey, “Oil for Nothing…And Gas for Free: Royalty Breaks for Big Oil Cost America Billions,” shows the cost of royalty-free drilling, the value of breaks for specific companies, and the amount of oil and gas being taken without compensation to the American people.
“Gas prices are hitting record highs for this time of the year. Our nation is staring down the ‘sequester’ that will slash programs for the middle class and working poor. And yet this report shows that we are still squandering tens of billions of dollars in free drilling to companies like BP, Exxon and more than 100 other oil and gas companies,” said Rep. Markey, the top Democrat on the House Natural Resources Committee. “Oil companies and their allies in Congress can no longer defend these oil company windfalls that cheat our taxpayers, pollute our budget negotiations, and deprive Americans of real services.”
Among the findings of the report, which can be found HERE, include:
--The so-called 'Big Five' oil companies—BP, Chevron, ConocoPhillips, ExxonMobil, and Shell—have received more than $2.8 billion in royalty breaks from such leases, paying nothing for 262 million barrels of oil and 361 billion cubic feet of natural gas. Close to 100 smaller firms have avoided more than $8.1 billion in royalty payments for oil and gas produced under such leases.
--Up to 3.14 billion barrels of oil equivalent remain for the taking under royalty-free leases. The Big Five are sitting on more than half of this total, with 1.6 billion barrels of oil equivalent that they can extract without paying royalties.
--State-owned foreign firms fully or partially own almost 40 percent of active royalty-free leases and have extracted for free more than 65 million barrels of oil and more than 125 billion cubic feet of natural gas from American waters.
--Leading recipients of royalty breaks include Chevron, with $1.5 billion in avoided royalty payments; Anadarko Petroleum Corporation, with over $1 billion; BHP Billiton Petroleum, with almost $685 million; Hess Corporation, with more than $565 million; and Murphy Oil Corporation, with almost $400 million.
In 1995, Congress enacted the Outer Continental Shelf Deep Water Royalty Relief Act, which offered royalty-free drilling for deepwater leases issued from 1996-2000. The intent of this law was to only provide royalty-free drilling when prices are low but oil and gas companies are still drilling under many of those leases as the result of an oil company legal challenge.
Proponents of the law argued that royalty-free drilling was necessary to encourage deepwater production at a time when the price of oil, then selling for less than $20 a barrel, was too low to fully compensate for the risks and costs of deepwater drilling. However, the current high price of oil—more than $90 a barrel—along with more advanced deepwater drilling technologies makes it highly profitable for companies to drill in deepwater, even while paying normal royalty rates.
“Oil companies are making record profits,” Rep. Markey said. “They should be paying the American people a fair price for the oil and gas they are taking from America’s waters. We have already given oil and gas companies $11 billion in special free-drilling breaks. It’s time for this free ride to end.”
Rep. Markey has pushed legislation for many years to fix this problem, including legislation he introduced in the last session of Congress that would recover this lost revenue. Rep. Markey will soon reintroduce similar legislation to correct this loophole.