DALLAS (January 17, 2007) – The House of Representatives is set to vote this week on a package of energy proposals that will impose new conservation fees on oil and natural gas taken from the Gulf of Mexico and will bar companies from future Gulf lease sales unless they agree to renegotiate leases agreed to under the Clinton Administration. According to National Center for Policy Analysis (NCPA) Senior Fellow H. Sterling Burnett, the package will likely make the U.S. more dependent on foreign oil and will lead to higher prices.
"There is nothing whatsoever in this plan that will increase gasoline supplies or reduce prices for consumers at the pump," said Burnett. "This is merely Congress attempting to punish an industry they don't like so that they can prop up one that they do."
In the 1990s, when oil prices hovered around $10 a barrel making new off-shore oil development unprofitable, the Clinton Administration wrote leases that contained no or low royalty fees to encourage production. The goal was met as companies bid on the leases and the nation's energy supply increased.
"Now that prices are high, Congress is acting like the oil companies snookered the government," said Burnett. "Should the government have required the companies to begin paying royalties if oil reached a certain price? Maybe, but its not their fault the government didn't do it. Now Congress wants to break the contract President Clinton signed, and if the industry doesn't agree to give up its rights under the current contract they will be barred from future contracts – that's extortion."
In addition, for reasons of fairness and to speed up domestic energy discovery and production, Congress decided in the 2005 energy bill to treat purchases of new equipment and other capital costs of offshore oil production the same as it does for wind and solar – allowing companies to write off the cost of their purchases (or depreciation of their equipment) on a shorter time scale than previously. Now Congress wants to rescind this.
"The 2005 agreement does not cost the taxpayers anything, as nothing leaves the Treasury, noted Burnett. "What it does do is encourage more new production and quicker replacement of old equipment. If Congress has its way these benefits will be lost." Burnett concluded that Congress should treat all energy sources equally in capital and equipment write-offs and let them compete in the marketplace.