Your Federal Government At Work: This Is Priceless

Bloomberg is reporting, data points:

• the bureaucratic error occurred under President Clinton
• Gulf of Mexico leases at issue were signed from 1996 - 2000
• followed on the heels of a 1995 law intended to encourage drilling by dropping fees when oil prices were low; and reinstating them when prices rebounded (floors and ceilings)
• bureaucratic error: leases signed in 1989 and 1999 failed to include price thresholds that would trigger royalty payments when prices rose
• "100s of producers" benefited from this oversight
• top winner: CVX -- avoided $1.49 billion in royalties; out of $2.62 billion total of all company royalty avoidance

Now, wouldn't you think the courts would agree that this oversight needed to be corrected? Nope, the Supreme Court blocked the government from collecting royalties on these leases. Wow.

Interestingly enough, the industry raised the issue.

“We renegotiated these leases at the time that the concerns were first raised,” Davy Kong, a spokesman for ConocoPhillips, said in an e-mail. “That agreement terminated when the courts ruled that under the law authorizing royalty relief -- the Deep Water Royalty Relief Act of 1995 -- the department did not have the authority to impose price triggers. ConocoPhillips accepts the court’s decision and has no further plans to address the issue.” 

And it gets better. You all know about "leases held by production." It is estimated that the five companies who profited most from this bureaucratic oversight may yet produce the equivalent of 1.6 billion bbls of oil. And no royalties to be paid.

The Bush government, in 2006, asked that the companies voluntarily re-negotiate the leases.

Apparently that offer is still on the table. As my daughter would text, LOL. 

[For "anonymous," if you want to defend the government's actions, write your congresswoman. Or the Supreme Court.]