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  • Anti-Drilling Policies Costing Federal Government Billions in Lost Revenue

    Billions of dollars in potential oil revenue that could help close the federal deficit is being lost as a result of President Obama’s anti-drilling agenda.

    Production in the Gulf of Mexico — which normally accounts for about 30 percent of all U.S. production — is expected to drop this year by 220,000 barrels per day, according to projections from the U.S. Energy Information Administration.

    With oil currently at $90 a barrel and the royalty rate at 18.75 percent, that equals $3.7 million in lost revenue each day.

    If the agency projections hold over the course of the year, the federal government would lose more than $1.35 billion from Gulf royalty payments this year.

    The number grows even larger when coupled with a lack of Gulf lease sales and fewer rental payments. Those three components — royalties, leases and rent — make up a sizeable amount of government revenue.

    The looming shortfall is raising red flags on Capitol Hill. Sen. David Vitter, R-LA, an outspoken critic of the Obama administration’s drilling moratorium and the subsequent slowdown in permitting, first called attention to it in September.

    “It’s not only about job loss along the Gulf Coast — the federal government is losing revenue as a result of the administration’s misguided moratorium,” Vitter explained.
    “I’ve been attacking the moratorium from multiple angles and will continue to do so until drilling can fully resume.”

    Interior Secretary Ken Salazar canceled a Gulf lease sale last October. He postponed another in the central Gulf of Mexico, originally scheduled for March, until 2012. One planned for October 2011 in the western Gulf also could be delayed until 2012. That would make 2011 the first year since 1965 that the federal government has failed to hold a lease sale in the Gulf.

    Bonus bids from lease sales averaged about $1 billion in 2009 and 2010, according to data from the U.S. Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE).

    The lack of lease sales ultimately means the government will collect less in rent payments by lease holders. Offshore rents currently generate more than $200 million per year.

    The Gulf revenue decline comes as Obama’s oil spill commission is recommending new fees for oil companies – a scenario that could be avoided if the government removed barriers to exploration and production.

    “Over the years, offshore production royalties have provided billions of dollars to the U.S. government,” said National Ocean Industries Association President Randall Luthi, former director of the Minerals Management Service, which predated BOEMRE. “Now, at a time when Congress is looking to maximize efficiency without raising taxes, there sits millions of dollars per day uncollected,” he said.

    The Obama administration has dismissed the financial impact. The revenue loss would be “negligible,” Rebecca Blank, under secretary for economic affairs at the Department of Commerce, told a Senate committee in the fall.

    “It is difficult to speculate now on the specific impact the moratorium would have over the five- or 10-year budget window, but one would expect the impact on the deficit to be negligible,” Blank wrote to the Senate Committee on Small Business and Entrepreneurship in September.

    “Revenues may be higher or they may be lower depending on future years’ oil prices and the time profile of production,” Blank said.

    Energy experts said the administration’s policies are certain to have long-term consequences for the industry.

    “You continually need new discoveries and new production coming online to replace what’s being depleted,” said Andy Radford, senior policy adviser at the American Petroleum Institute. “These wells taper off over time — the ones that are producing now — so without a continual flow of new discoveries and new production, the number will continue to decrease.”

    A report from the economic forecasting firm IHS Global Insight estimated that federal, state and local taxes related to the Gulf, combined with royalty payments, totaled $19 billion in 2009.

    Royalties, bonus and rent payments made up more than $6 billion of that number. That pot of money could go a long way toward deficit reduction. And that’s from the Gulf alone.

    Significant additional revenues would be generated if the federal government opened access to exploration and production in areas currently closed to development such as the eastern Gulf of Mexico, portions of the Rocky Mountains, ANWR, and the Atlantic and Pacific coasts.

    A recent study conducted by Wood Mackenzie for the American Petroleum Institute estimated that increased access to those areas would bring $150 billion into federal coffers by 2025.

    Why leave so much money uncollected, especially in a time of rising deficits?

    Originally published by the Washington Examiner.

    Posted in Scribe [slideshow_deploy]

    28 Responses to Anti-Drilling Policies Costing Federal Government Billions in Lost Revenue

    1. Armstrong, USA says:

      Start drilling now. I think a portion of the federal revenues from drilling should be dedicated to paying back the money borrowed from Social Security.

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    3. joseph benegbi toron says:

      america should strive to be self sufficient in the oil energy field for strategic reasons

    4. Al Ladd,South Florid says:

      Are elected or appointed legislators,president/vice president,judiciary considered federal employees?

    5. Norma, Priest River, says:

      I don't really have a comment, its a question. Why are we not free of middle-east oil AND substantially decreasing our debt by not only utilizing our offshore oil, but ALSO developing the Williston Basin, better know as 'Bakken', which some estimate could supply our oil needs for over 2000 years????? Since we have immense oil reserves, WHY are we still dependent on other, sometimes unfriendly nations for our needs?

    6. Dorothy Kuns, Housto says:

      I can't believe our own government is so insanely blind to what's right in front of them. No oil, no future! Unless they have some secret plan up their sleeves for pulling America out of this depression, they need to re-open the gulf for oil production. What, we want to give all of our money away to OPEC? WTF?

    7. George (Oldguy), Wes says:

      This president appears to be at war with this country. He is crippling our current and future energy production, running up tremendous debt, refusing to secure our borders, and waging a legal battle against the States. He also appears to be attempting to make Congress irrelevant by use of Executive Orders and unelected bureaucrats.

      It is time for Congress to take a stand and refuse to raise the debt limit. The debt was raised a short time ago and the Government continued to spend recklessly.

      Pay our debt obligations first, then shrink the government by cutting Federal salaries back to the levels of private industry, eliminate agencies and departments that haven't met their original objectives or have and now have no legitimate purpose.

    8. Dave Kegler says:

      I've been working in the Gulf for ten years on motor vessels in support of oil and gas production; I've been laid off since October. The company I worked for shut down 8 of its' 15 vessels. The same thing hapeened to a lot of boat companies. No lease sales – no new contracts, hundreds of boats shut down hundreds and hundreds of crew members out of work, support staffs leaned out, support industry workers out of work, all the run off business' laying off. A lot of companies are selling of thier boats or moving them to Brazil, Mexico, Trinidad, and "ELSEWHERE". This policy is irresponsible and destructive to our country and her people. Right now I'm actively pursuing employment in other countries to continue my career.

    9. Bill, New York says:

      So did everyone not notice Deepwater Horizon then? Do you want that off your coast?

    10. Joaeph Gause says:

      We have to vote for local representatives and senators who promise to restore American living standards-good manufacturing jobs for blue collar workers. If the NAFTAs and other free trade agreements do not really benefit Americans, they

      must be repealed. And tariffs must be slapped on foreign imports. We will not be able to buy cheap imports, but we will make products ourselves. Bring all the aged machinists, iron workers, auto workers out of retirement to educate our young how to build quality products. Nationalize the Fed-convert it to a U.S. central bank under

      the U.S. Treasury. Default on all loans to the Federal Reserve, and to many foreign

      governments. Imprison all senior members of the U.S. Federal Reserve, and most

      executives of Goldman Sachs, Chase Morgan, Bank of America, Citibank, Wells Fargo. Declare a 50% reduction in the value of all outstanding home mortgage

      balances owed. Support the Tea Party activists to get back to basics. Vote out

      any Republican or Democrat who opposes these goals.


    11. Pingback: Democrat anti-drilling idiocy costing government billions in lost revenue « The New Normal

    12. Brian, Norwood, OH U says:

      I agree that we, as Americans, need a short term solution to the energy crisis; however, that should not preclude investing in longer term solutions, such as renewable energy.

    13. Brian, Norwood, OH U says:

      Oil is not our future. Sustainable and renewable energy sources are our future. Oil is the best short term solution to our energy crisis. However, oil makes us dependant on other countries, with whom we may have conflicts. I see the best solution short of drilling for more oil, would be ethanol alcohol– a product made from corn like gasoline.

    14. Lloyd Scallan (New O says:

      Hey Bill – Deepwater Horizon was off MY coast and since I worked in the offshore oil patch for a number of years, I think I might know a little more than someone sitting in his flat in New York. The damage that was caused by the BP spill was made much worse because of the deliberate non-action of Obama not to accept help within the first few days, then the deliberate actions by his various controled government agencies including USCG, USFWS, DOI, and others that needed to make this "crises" as bad as it was. Let us not forget the real reasons what the well blew in the first place and why the one major safty device (BOP) did not operate.

      Oil is the lifeblood of Louisiana and this nation. It effects every aspect of our daily lives. Obama has an agenda to end our American way of life by any means possible. Ending offshore drilling is just one. Have you, or anyone else, noticed that evertime Obama wants a certain piece of socialist legislation passed or needs his poll number to increase, a "crises" (like Arizona) seems to arrive just in the nick of time?

    15. Corky, Howey in the says:

      Deep Water Horizon was truly a disaster and I truly hope we never have another. But, when a plane crashes and 250 people are killed is not that a disaster too? Do we stop flying? No. We try to find the problem and repair it, so it will never happen again. To stop drilling is not the way to acheve this goal. (O)bama is leading us down a road to ruin and so many Americans are afraid to face that fact. High price at the pump. High price at the market. High price for healthcare. High price to grow old. I use to think that Congress was made up of Americans too but, now I know better. Both parties have let us down with the power grab. Just the Denocarts seem to do it more against our will. (and don't care) Don't want to believe me? How much money have they spent in the last two years compaired with all the money spent in the last say 50 years?? Look at the agenda thay are pushing. Are you happy with it? The few that are happy need to be like the Deep Water Horizon and be repaired…Wake up you real AMERICANS

    16. Mike, Wichita Falls says:

      While there are some federal lands there, most of the Bakken reserves in North Dakota and Montana are under state/private land which would fall under the jurisdiction of state regulatory agencies, and while Bakken oil production has more than doubled over the past three years, the biggest impediments to the development of the Bakken seems to be lagging infrastructure, water and its disposal…again state issues at most. This is not to say that other federal agencies, such as the EPA, cannot or will not encroach on that authority, as they have in Texas, especially in the last two years.

      I will not apologize for BP's massive oil spill, but I will not accept the premise that their irresponsibility is indicative of all offshore operators. (Although I have seen no evidence, I still wonder how many safety regulations were not fully enforced in a quid pro quo for massive campaign contributions.) Why punish them all or place all federal lands/waters off limits? Why not just punish BP, as they illegally did with the $20B escrow fund or as they should have legally done through the courts, or exclude only them from future lease sales?

      We do see a limit to their appetite for revenue. They will forgo it when it punishes "big oil" and oil-friendly states who stand up to them.

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    19. Jeanne Stotler,Woodb says:

      Read "Liberty and Tyranny" by Mark Levin, he explains the reason behind this. It is true if we upgrade our refineries, drill for oil here at home, we could pay off our debt to China,(In oil) and keep our gas prices reasonable. Te gv't. has incrouraged the declne in our refineris, where some accually closed. Recently there was an article about which companies bought OPEC oil, Exxon, Texeco/Mobil were among the highest, Sunoco does not, Citgo buys from Venezuela, Gas at Sam's(WalMart) is also bought here in USA. I for one do not buy gas unless it's absoluely neccessary from any company that support this debacle to ruin our country.

    20. Allan Miles St. Pete says:

      What's the holdup at the Baaken Basin in North America between U.S. & Canada? From all reports there is more oil there than in all of Saudi Arabia. Politics is the problem and the politicians are apparently helpless against our sem-dictatorship which incidentally is growing stronger day by day. The Fed's pay the politicians and leave us hopeless and frustrated which is now their aim. This is not the America I knew in my younger days. It was much, much, better for the people. We were free and happy. Today we are not as FREE and we certainly are not as happy.

    21. Pingback: Obama’s Drilling Ban Piles Billions on Federal Debt | Impeach Obama Campaign

    22. Paddy Lenihan, Kirkl says:

      The state of CA is foregoing about $2 billion/year from Santa Barbara Channel drilling that can be realized withing 18months. How can those who govern a bankrupt state be so stupid?

    23. Pingback: ~THIS JUST IN… | Just Piper

    24. Walt Mn. says:

      We now know the reserves in Montana, Whyoming, and N Dakota are more than the middle east. I ask why the oil companies are not building refineries and drilling wells to offset the debt and give this country independence from foerign oil? Is the administration not aware or do they have an agenda which is not in concert with the people of the U.S.A. ?

    25. Dinah Garrison Fairb says:

      How many zeroes does a number need before it isn't negligible? In the last 2 or 3 weeks I have heard so many government officials talking about tens or hundreds of billions of dollars and saying it is such a small amount, it really doesn't matter. Duh. Have none of these people heard of adding? Any amount saved would be better than more spent. I have also heard people questioning whether all of these efforts to stop oil drilling in various places and coal drilling in Virginia might be part of a plan to force the US to accept and move to "greener" forms of energy. If so, I'm not impressed. Some of those green ideas don't really work out so well. We just aren't ready for them, even if we might eventually move in that direction.

    26. Janiew says:

      Obama today is talking about getting rid of regulations that are redundent. How about the one that is harming our economy the most- his totally illogical ban and stifiling regulations on our energy industry. Between him, the EPA and other regulatory agencys this country will be dependent on foreign oil for a long time, which is something we CANNOT afford. Not now or in the future.

      The amount of revenue lost must take into account all the ancillary jobs and buisnesses lost as a result of this shut down.

      To say that because of the Deep Water Horizon blowout we need more stringent oversight and regulations ignores the fact that one cannot legislate something from never happining. There will always be the human factor. Other countries are going after all the oil they can get without the crazy regulations we have placed on ourselves. Does this make any sense? Absolutly not!!!!!

      We need to force Congress to stand up to Obama, his Czars, the EPA, etc. and open up all the energy fields for the future of this country. NOW!!!!!

      This country can be energy independent and at the same time work towards the Green Economy that we all want. It's a matter of priorities and what works at this point in time. Right now oil is what we need, and we have it and the means to get it. It's a nobrainer. Except for Obama.

    27. George (Oldguy), Wes says:

      We do have to stand up and I believe we have to start by applying pressure at the State level by pushing our leaders to take back the State's sovereignty and regain control of Federal lands along with the natural resources they contain.

      We appear to be running out of time!

      Once the Administration finishes neutering Congress they will be free to plunder our natural resources.

    28. Andy says:

      Great article – A lot of information on oil related issues can be found at: http://oilprice.com

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