Ruling by Federal Court Puts Collection of $6 Billion at Risk
By Jeffrey H. Birnbaum
Washington Post Staff Writer
Thursday, November 8, 2007
In four separate pieces of legislation -- two energy bills, the farm bill and a bill that would fund rural schools and libraries -- lawmakers in the House of Representatives make use of $6 billion in payments from oil companies.
Unfortunately, the same $6 billion gets spent in each bill.
What's more, because of a recent federal court ruling, it's unclear whether that money will ever be collected.
It's an extreme example of the contortions Congress has been going through to comply with pay-as-you-go rules put in place by the Democratic majority, requiring that any spending increases or tax reductions be offset with spending cuts or tax increases.
Finding such offsets, or "pay-fors," has proven so difficult that a few of the most viable options have turned up in more than one bill. But four bills appear to be a record.
The $6 billion in question involves leases granted to oil companies by the federal government in the 1990s. Back then, oil prices were so low, about $10 a barrel in 1998, that the companies did not consider it profitable to drill in the United States and simply bought most of their crude from the countries in the Middle East and elsewhere.
Washington decision-makers, eager to instigate domestic production to counter rising imports, decided to waive the normal royalty payments from companies that agreed to drill on federal land, in this case in the Gulf of Mexico.
The royalty relief was not meant to be permanent. Most contracts from that period included a provision that would reinstate payments to the federal government if oil prices rose significantly. Leases granted in 1998 and 1999 did not include that clause, so this year lawmakers in the House voted to impose a fee in lieu of a royalty on the leaseholders from those two years. Revenue from the fee was estimated to bring in $6 billion over five years.
The House has voted repeatedly to put that $6 billion to work. In January, the fee turned up as paying for most of a small energy conservation bill. In July, the House voted to include the fee as a minor contribution to the costs of the massive farm-subsidy legislation. The next month the House put the fee to use in a separate and larger energy bill. And in September, a House committee wrapped the fee into legislation that would underwrite schools and libraries, primarily in the West.
"This example of cooking the books has to set a record," House Minority Leader John A. Boehner (R-Ohio) said via e-mail. "Democrats tried to spend $24 billion when they had $6 billion, and now they don't even have that, according to the court."
"It's hypocritical for the Republicans to criticize us," said Brendan Daly, spokesman for House Speaker Nancy Pelosi (D-Calif.). "They would often use the same pay-fors" while bills were making their way through Congress, and only enact one of them into law.
Last week, a federal judge in Louisiana threw into question whether any of the money could be collected at all. The judge ruled in a lawsuit brought by Kerr-McGee Oil and Gas that the government had no authority to begin collecting royalties even if the price of oil reached a certain level, no matter how high.
If upheld, the ruling could allow companies to escape paying not just the $6 billion but also what the United States has estimated to be up to $60 billion in royalties already being collected on oil and natural gas produced in the Gulf of Mexico, Republican congressional aides said.
Democratic lawmakers said that the court's decision might actually boost the case for the new fee because it could be imposed as a way to make sure the oil companies pay for their use of the federal waters.
"With oil approaching $100 a barrel, oil companies should not get away with drilling royalty-free on public lands, profiting off a public resource without ever paying for the privilege," said Rep. Edward J. Markey (D-Mass.), chairman of the House Select Committee on Energy Independence and Global Warming. "Last week's court ruling only heightens the need for Congress to pass language in the House energy bill which could ensure that even if the ruling stands, American taxpayers will not lose out."
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