US 'gains little from federal drilling incentives'
A newly released Interior Department study shows that the US government gains very little from lucrative incentives programmes designed to encourage energy companies to drill in Federal waters.
The consultants' report, which the Interior Department has withheld from publication for more than a year, found that incentives programmes allowed companies to avoid paying billions of dollars in royalties, while encouraging only a tiny increase in actual production from publicly-owned offshore acreage.
The New York Times obtained a copy of the study only after repeated requests, it said.
The cost to the US government of extra oil generated under the schemes could be as high as $80 per barrel, the report said. Analysts quoted by the paper suggested the government could buy far more oil with the same money on the open market.
Oil closed in New York today at $62.41 per barrel.
The analysts said the US allowed private companies to drill on public lands under very generous terms, demanding a far smaller share of revenues than many other countries. In addition, they said, the US had increased incentives in recent years, even as oil prices rose and other countries have passed measures to increase their revenues from drilling.
The US government earns about 40% of revenue from royalties and corporate taxes on oil and gas produced from federal lands, consultancy Van Meurs Associates said.
This compares with a worldwide average of 60% to 65%. Major producer Norway, by contrast, earns at least 70% of revenues from its production.
Supporters of the incentives claim they are necessary if the US is to increase its dependency on foreign oil by tapping deep-water reserves in the Gulf of Mexico.
However, lawmakers in the incoming Democratically controlled Congress have said they will review royalty relief schemes, tax breaks and other incentives offered to oil companies in recent years.
The Department of Interior Minerals Management Service, which originally commissioned the report, is also under scrutiny after language limiting royalty relief when oil prices rise was left out of Gulf of Mexico leases signed in 1998 and 1999.
While five big oil companies have agreed to revise their leases, more than 50 other companies have refused to renegotiate their contracts, potentially costing the Federal Government billions of dollars of lost revenues due on the exploitation of resources it manages on behalf of US taxpayers.