Error May Have Cost U.S. $7B in Royalties

An error has allowed oil and gas companies to avoid paying federal royalties on hundreds of offshore leases issued in the late 1990s, an Interior Department official said Wednesday. One lawmaker said the mistake could cost the government $7 billion in revenue over the life of the leases and called for an investigation to see if the unexplained change in lease language might have been deliberate.

Congress in 1995 exempted companies from royalty payments for oil and gas taken from leases issued in the deep waters of the Gulf of Mexico, but also required that the royalties be paid if oil or gas prices reach a certain threshold. Now that prices have soared well above the threshold, royalties should be paid on many of the leases, which still have decades to run. But the threshold provision ``was inadvertently dropped'' from an addendum attached to more than 1,100 leases issued by the department's Minerals Management Service in 1998 and 1999, allowing the companies to avoid royalty payments for years to come, an agency official told a hearing of the House Government Reform subcommittee on energy and resources.

``We have not been able to ascertain who pushed the button'' that made the changes in the lease language, said Walter Cruickshank, deputy director of the Minerals Management Service. He said a person - not a computer - would have had to make the change, but there was no agency decision to remove the threshold language from the leases.
At the time, Cruickshank said, ``everyone knew the (price) threshold applied,'' even though prices were well below the threshold. The royalty relief was embraced by Congress and the Clinton administration as a way to promote deep-water oil and gas development.

Rep. Darrell Issa, R-Calif., the subcommittee chairman, said the changes made in the 1998-99 leases are ``suspicious'' and he is not ready to accept that they were simple mistakes. He said he planned to seek more documents from the agency and said the issue may need to be investigated by the Justice Department to determine whether there was any deliberate wrongdoing. `This is a $7 billion word processing error,'' Issa told reporters. He said some of the leases issued during those two years could remain in effect for as long as 85 years, so the government will be unable to collect royalty payments from oil and gas taken from those leases for decades to come.

http://www.guardian.co.uk/worldlatest/story/0,,-5656952,00.html

I smell a set-up. ("Our hands are tied! Its Clinton's fault!")

goofed.

Sometimes a mistake is just a mistake. Holding the prez responsible for every goofup that can happen when the federal workforce is in the hundreds of thousands of people and produces millions of pages of text per year is just plain silly.

On the one hand, yes, he's responsible, blah-blah-blah. Unitary executive and all that; it's his enchilada. On the other hand, there's enough wriggle room to navigate several supertankers.

"SMIRK" as usual - pResident Oil-Crony-in-Chief

Maybe, maybe not. Wonder how much follow through they will do on this one.

Speaking of Oil-Crony-in-Chief, did you happen to catch this post over the weekend?
A Magic Way To Make Billions (*Co Budget Boondoggle)

http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=102&topic_id=2133388

A Magic Way To Make Billions
How lobbyists are pulling off a synfuel scheme with help from key lawmakers--and you'll pay
By DONALD L. BARLETT AND JAMES B. STEELE

The wording is so bland and buried so deep within a 324-page budget document that almost no one would notice that a multibillion-dollar scam is going on. Not the members of Congress voting for it and certainly not the taxpayers who will get fleeced by it. And that is exactly the idea.

With Washington reeling from the Abramoff lobbying scandal and Republicans and Democrats alike pledging to crack down on influence peddling, with one lawmaker already gone from Capitol Hill because he traded favors for cash, you're probably guessing this isn't the best time for members of Congress to dispense a fortune in favors to their friends.

Guess again.

Buried in the huge budget-reconciliation bill, on which House and Senate conferees are putting the final touches right now, are a few paragraphs that accomplish an extraordinary feat. They roll back the price of a barrel of crude oil to what it sold for two years ago. They create this pretend price for the benefit of a small group of the politically well connected. You still won't be able to buy gasoline for $1.73 per gal. as you did then, instead of today's $2.28. You still won't be able to buy home heating oil for $1.60 per gal., in place of today's $2.39. But a select group of investors and companies will walk away with billions of dollars in tax subsidies, not from oil but from the marketing of a dubious concoction of synthetic fuel produced from coal and dependent on government tax credits tied to the price of oil.

more...
http://www.time.com/time/magazine/printout/0,8816,1167729,00.html

What a novel concept. :sarcasm:

oil companies avoiding civic duties?

Nah.

duties and hasn't anybody heard we are the government and we can change the rules if we want too...

& if they had some kind of role in this hosing of the American public

Could the government not state that an error should not preclude the gathering of the revenue intended and forcibly rewrite the contracts? I mean if they can take someones home for a stripmall purely to make more taxes...

WASHINGTON - How it happened or who's responsible is a mystery eight years after the fact. But what may have been a simple error — or perhaps something more ominous — has given a multimillion-dollar windfall to a group of oil and gas companies and could cost the government billions of dollars more in the years to come.

The Interior Department disclosed Wednesday that a provision was mysteriously deleted from hundreds of federal drilling leases in the late 1990s that would have required producers to pay royalties, once prices reached a certain level, on oil or gas taken from deep waters of the Gulf of Mexico.

In 1995, Congress exempted deep-water oil from royalty payments to spur development. But a price threshold was included in leases issued in 1996 and 1997 and again in leases sold in each year since 2000 that reinstates the royalties if market prices reach a certain level.

For some reason the language "was inadvertently dropped" from an addendum attached to more than 1,100 leases the Interior Department's Minerals Management Service issued for 1998 and 1999, Walter Cruickshank, the agency's deputy director, told a House Government Reform subcommittee Wednesday.

snip

http://news.yahoo.com/s/ap/20060302/ap_on_bi_ge/oil_royalty_flub

aren't they, sticking anti Amrican provisions into unrelated bills, putting tax breaks for cronies on as riders to national parks bills, deleting language that would have raised revenue from oil companies that were already getting a big break on nominally priced leases! My goodness, let's contact the manufacturer.

Better yet, let's vote incumbents out of Congress.

Same one that the allowed oil and natural gas companies to repeatedly manipulate markets, and allowed the likes of Enron, Dynergy and Duke to create the California "energy crisis."

No surprise to me that its Interior Department was in on some of the scams, too.

did it sneak in during a joint resolution midnight escapade?

Director: Cynthis Quarterman.

who are these people?

There are GSA audits of these agencies. I don't believe that no one ever caught this. Also there are other watch dog groups who monitor this stuff.

Probably there's more to this than what's being initially reported. Especially the "Blame Clinton" thing that the Repugs always use for butt covering.

well kept him tied up in knots for 8 years.

AAAARRRGGGHHHHHHHHHH.

Lost language drains billions
Mysterious error to cost government energy royalties


By H. JOSEF HEBERT
Associated Press

WASHINGTON - How it happened or who's responsible is a mystery eight years after the fact.

But what may have been a simple error — or perhaps something more ominous — has given a multimillion-dollar windfall to a group of oil and natural gas companies and could cost the government billions of dollars more in the years to come.

The Interior Department disclosed this week that a provision was mysteriously deleted from hundreds of federal drilling leases in the late 1990s that would have required producers to pay royalties, once prices reached a certain level, on oil or gas taken from deep waters of the Gulf of Mexico.

In 1995, Congress exempted deep-water oil from royalty payments to spur development. But a price threshold was included in leases issued in 1996 and 1997 and again in leases sold in each year since 2000 that reinstates the royalties if market prices reach a certain level.

For some reason the language "was inadvertently dropped" from an addendum attached to more than 1,100 leases the Interior Department's Minerals Management Service issued for 1998 and 1999, Walter Cruickshank, the agency's deputy director, told a House Government Reform subcommittee Wednesday...cont'd

http://www.chron.com/disp/story.mpl/business/3697657.html

professional negligence.

I bet the corporatocracy doesn't want to privatize whatever part of the government made this "mistake."

how the hell can this be a mystery?
If it was you or I that had messed up like this on our account taxes you better believe they could and would go back find our error, make us pay with interest and put us in prison if we broke the law!