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Washington, D.C. - Congressman Maurice Hinchey (D-NY) vowed to keep fighting for an amendment that he and Congressman Ed Markey (D-MA) offered in the House today to close a loophole that energy companies have used to avoid paying the federal government as much as $60 billion in royalty payments for taking resources from public lands. Hinchey and Markey offered their loophole-closing measure to a larger tax bill that included an expansion of offshore drilling. While the overall bill passed, House Republicans voted down the Hinchey-Markey amendment by a margin of 205 to 207.
"It is outrageous that this Congress refused to stand up to the energy companies and demand that they stop taking advantage of the American public by bilking them out of tens of billions of dollars for oil and gas taken from public lands," Hinchey said. "This fight is not over though. There will be a new majority in Congress come January and one of the first orders of business will be to close this gaping loophole that is allowing oil and gas companies to pocket tens of billions of dollars that belong to the American people."
The amendment that Hinchey, who is a member of the House Interior Appropriations Subcommittee, and Markey offered today was similar to an amendment the congressmen and several of their colleagues successfully offered in the House in May to the Interior Appropriations bill for Fiscal Year 2007. The amendment was aimed at getting energy companies with royalty-free contracts originating in 1998 and 1999 to rework their contracts so that they contain provisions for royalty payments to the federal government. While the Hinchey-Markey measure didn't require energy companies to rework their contracts, it does bar them from receiving future contracts unless they work with the Interior Department to redo the existing contracts that contained the royalty-free error, thus providing energy companies with a large incentive to renegotiate the existing contracts.
Beginning January 4, Democrats will control both chambers of Congress. The Democratic leadership has made it clear that closing the royalty loophole for oil and gas companies will be a top priority.
"Republicans may have obstructed our efforts today, but they will not stop us for much longer," Hinchey said. "With Democrats less than a month away from controlling Congress, the royalty loophole is on the brink of finally being sealed shut."
The Government Accountability Office (GAO) reports that the Interior Department itself estimates that the current royalty loophole provided to oil and gas companies will end up costing the federal government as much as $60 billion in lost payments.
The Deepwater Royalty Relief Act of 1995, which Hinchey opposed, gave the Interior Department the ability to exempt the energy industry from paying royalties under the pretense that such a policy was needed to spur deepwater exploration when prices of oil and gas were low. That measure allowed the Interior Department to decide whether or not to put price thresholds into the leases that would trigger royalty payments to the federal government once oil and gas prices climbed to a certain level. However, due to a clerical error, the Interior Department left out price thresholds on contracts signed in 1998 and 1999, allowing oil and gas companies to extract resources from public property without paying royalties, regardless of the price of oil or gas. A handful of those roughly 1,000 royalty-free leases are starting to produce oil and gas now. These leases are expected to produce oil and gas that would net the federal government more than $60 billion from oil and gas companies, but the American taxpayers don't receive royalty payments under current law. To make matters worse, Republicans extended the Deepwater Royalty Relief Act as part of the energy bill they passed in 2005.
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