Oil Moratorium Costing Government Billions

NEWSMAX.COM MAY 1, 2011

The Obama administration’s moratorium on offshore drilling is depriving governments of billions of dollars in royalties, lease bids, and taxes — and the lost revenue will grow significantly if no new drilling leases in the Gulf of Mexico are sold this year.

In the wake of the April 20, 2010 explosion of the Deepwater Horizon rig, the administration issued the moratorium on May 6. It suspended work on 33 wells in various stages of construction, halted new lease sales, and suspended permitting for leases already offered.

As a result, the U.S. Energy Information Administration projects a decline of 240,000 barrels a day in oil production in the Gulf this year. “That represents billions of dollars in potential revenue that could help close the federal deficit,” according to Rob Bluey, director of the Center for Media and Public Policy at the Heritage Foundation.

The moratorium was lifted on Oct. 12, but since then oil companies have complained of a “permitorium” — a deliberate slowing of the permitting process. This year could be the first since 1965 in which the federal government did not sell leases in the Gulf.

Oil companies pay the federal government an 18.75 percent royalty on the oil produced. In 2008, the offshore industry paid $8.3 billion in royalties, and another $9.4 billion for bids on new leases. Last year those bids brought in just $979 million.

In 2009, royalties, lease bids and rent payments totaled more than
$6 billion, according to the forecasting firm IHS Global Insight.
“Federal, state and local taxes related to the offshore oil and gas operations in the Gulf totaled $13 billion,” Bluey notes. “That $19 billion pot of money could go a long way toward deficit reduction.”

In addition, opening areas now closed to exploration and production, including the Arctic National Wildlife Refuge and the eastern Gulf of Mexico, would bring in an estimated $150 billion by 2025.

“At a time when voters are calling on the federal government to balance its budget, revenue from oil companies would be one way of helping out [and] the oil produced would reduce the price of gas at the pump,” Bluey concludes. “The Obama administration should immediately begin to issue new permits for the Gulf of Mexico and explore other untapped domestic resources.”

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