Offshore drilling debate resurfaces
US Capitol Building
TESS VIGELAND: Today the House debated legislation that would allow oil and gas drilling near the nation's coastlines. That's been banned for more than 20 years. The bill also tries to collect billions in lost revenues from energy companies in the form of royalty payments. Marketplace's Scott Tong reports.
SCOTT TONG: This is complicated. So let's drill down to the basics here: Congress thinks oil companies have shortchanged the feds by $10 billion. How?
Rewind to the mid 90s: Energy prices were low so Uncle Sam gave Big Oil a subsidy to entice drilling in federal waters. The subsidy — discounts on royalty payments — was meant to expire when oil prices and profits rose. Didn't happen.
Here's Tyson Slocumb of Public Citizen:
TYSON SLOCUMB: Because of a bureaucratic error at the end of the Clinton admininistration, large oil companies are paying far below market prices to extract oil and natural gas.
Since the government boo-boo was written into contracts, Congress is kinda stuck.
SLOCUMB: There's very little they can do about unilaterally changing the terms of the contract. So they're trying to coerce the industry in a way, to come back to the table and renegotiate the sweetheart deal.
Today's bill encourages oil companies to pay the royalties by slapping giant fees on those who don't. And it turns out most of the big drillers are willing to talk. Industry consultant Peter Beutel says it pays to appease an angry Congress:
PETER BEUTEL: We need to remember that in the late 70s when oil companies were reaping huge advantages from higher oil prices, unheard of prices, there was instituted the windfall profits tax.
One way or another, odds are the royalty payments will be collected.
In Washington, I'm Scott Tong for Marketplace.