Royalty Rip-Off

The American treasury is already short more than a billion dollars because of the Interior Department

The problems are twofold. The first is a loophole in leases signed by the Clinton administration in 1998 and 1999 to encourage deep-water exploration at a time when oil and gas prices were relatively low. The leases gave companies a break on royalty payments, but did not include a standard escape clause that would have restored full royalties when prices went up. The loophole has already cost the taxpayers $1.5 billion and, if not corrected, could cost $10 billion more over the course of the leases.

A bill that would have forced companies to renegotiate these flawed leases before being granted new ones failed by only two votes in the House last Friday. Unless the Interior Department succeeds in renegotiating the leases quickly, the new Congress should pass the legislation.

NY Times