US Government Loses Billions in Oil Royalties

You would think that as the US government thinks about buying up large numbers of distressed mortgages held by the country’s ailing financial institutions and sticking them in the “Bad Bank”, it would be in need of every dollar it could get.
As one financial analyst said last night, the bad bank might work until American tax-payers are told just how much of their money is being used to prop up these failed mortgages.

The other fall-out is that everyone now thinks there will be tighter regulation of the financial sector. As everyone is obsessed about banking, slipping under the radar is yet another scandal that will cost US tax-payers billions, but this one has to do with the oil industry. And it is not the sex, drugs, “in bed with the industry” scandal either.  But is does concern the same US Government Agency – the U.S. Minerals Management Service – involved in the sex scandal.

Back in the mid nineties Congress decreed that it would give oil companies a break to encourage them to drill deep off shore in the Gulf of Mexico. At the time the Deep Water Royalty Relief Act of 1995 passed, members of Congress intended that the break on royalties would be suspended when oil prices rose past a certain amount.

But for some reason — still undiscovered despite years of investigations — the MMS failed to include the cutoff provision in contracts written in 1998 and 1999. The MMS’s mistakes could end up costing US taxpayers as much as $14 billion in uncollected royalties, according to a series of reports by the Government Accountability Office, the investigative arm of Congress.

“This is revenue to the federal government that needs to be collected, and we need to reform the program,” said Senator Maria Cantwell, D-Wash., who has pushed to recoup the unpaid royalties and plow them into promoting renewable forms of energy.

$14 billion could help kick start the renewable revolution and give the banks something positive to invest in.