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Project on Government Oversight




Oil State Senators Push $200 Million Giveaway to Big Oil

July 15, 1999 


Senators Kay Bailey Hutchison (R-TX) and Pete Domenici (R-NM) want language approved in the Interior spending bill that would reward oil companies with $130 million for cheating taxpayers and the U.S. Treasury. Oil companies have already received $72 million under the provision, which will likely be voted on in the Senate in the next few days.

According to the Department of Interior, oil companies bilk the taxpayers of $66 million annually in fees known as "royalties" for drilling oil from public and Native American lands. Oil-accommodating Senators have enabled the ripoff schemes by repeatedly passing moratoriums on proposed regulations to prevent further cheating since May, 1998.

The new regulations would require oil companies to pay royalties on the basis of prices set in the free market rather than on artificial prices set by the oil companies themselves -- the so-called "posted prices."

The offenses of the oil companies under current regulations are so egregious that state governments including Alaska, California and Texas have collected close to $5 billion in lawsuit settlements. Yet, the federal government has lagged behind under the pressure of special interests. POGO estimates that oil companies have defrauded the federal government of more than $2 billion. Last year the Justice Department finally joined suits against most of the oil companies affected and reached its first settlement with Mobil in the Fall for $45 million.

The proposed two-year moratorium extension is unprecedented - prior extensions were made for months at a time. Sources say Senators may be hoping for an oil-friendly President to be elected by the time the proposed moratorium expires.

Oil royalties help state governments pay for the education of school children, the Land and Water Conservation Fund, and Native American nations. The Minerals Management Service calculates that oil royalties have funded more than 37,000 park and recreation projects.

According to the Center for Responsive Politics, oil companies spend as much or more lobbying against oil royalty reforms every year as they would spend if the regulations were implemented. Oil and gas interests spent $93 million on lobbyists in 1997 and $14 million in contributions to political candidates in the most recent election cycle during 1997-98.

Founded in 1981, the Project On Government Oversight (POGO) is a nonpartisan independent watchdog that champions good government reforms. POGO's investigations into corruption, misconduct, and conflicts of interest achieve a more effective, accountable, open, and ethical federal government.

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