Democrats: When the War Was Lost

Here we are, in early 2006 and the headlines are briefly given over to the disclosure that the oil companies have been underpaying their royalties from drilling on US public lands by $7 billion. One of the firms, Kerr McGee, is saying defiantly it doesn’t owe the U.S. Treasury a penny and is suing in US court to have that view confirmed.

Finally approved by Congress on the last day of the 1996 session, the law did four things: it placed a seven-year limitation on the auditing of oil company books recording income from drilling on public lands; it turned over many of the auditing responsibilities concerning drilling on federal lands to the states; it permitted the oil companies to sue the federal government to collect interest on “overpayments”, and it allowed those very same companies to set the “market price” of the crude oil upon which the royalty payments to the federal government are based. In reality, the bill legalized a scam the big oil companies had been running for decades, underpaying royalties on crude oil extracted from federal lands, including the Alaskan fields.

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