[Congressional Record Volume 141, Number 59 (Thursday, March 30, 1995)]
[Extensions of Remarks]
[Pages E741-E742]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                UNJUSTIFIED GIVEAWAY TO THE OIL INDUSTRY

                                 ______


                           HON. GEORGE MILLER

                             of california

                    in the house of representatives

                        Thursday, March 30, 1995
  Mr. MILLER of California. Mr. Speaker, just when you might have 
thought you had heard it all about the limitless greed of the special 
interests for more subsidies and favors, along comes the oil and gas 
industry, bellying up to the bar for a few more billion from taxpayers.
  This time, it's called a royalty holiday: Forgiving oil companies 
from paying royalties to taxpayers--who own the oil and gas--in cases 
where the lease is in deep water.
  [[Page E742]] Now, you would logically assume that, absent some 
enticement or tax break, industry would be unwilling to sink an 
offshore well in deep water, thereby necessitating the royalty holiday 
to encourage exploration in otherwise unattractive areas. But you would 
be wrong. Indeed, the industry press is replete with reports of growing 
interest and activity by industry in deep water areas.
  According to a March 13, 1995, article in the ``Oil and Gas 
Journal,'' written by senior editor A.D. Koen, ``Improved economics, 
better technology, and growing experience are converging in the Gulf of 
Mexico's ultradeep water areas to fuel a new era of U.S. offshore 
development.'' The author describes the factors contributing to this 
surge in Outer Continental Shelf [OCS] development: ``Companies taking 
the plunge into deeper water credit better economics with providing the 
impetus to begin exploiting discoveries. Lower finding, development, 
and production costs make some of the gulf's larger reservoirs in very 
deep water competitive with many other offshore prospects, United 
States or non-United States in any water depth.''
  Deep water reserves in the gulf are providing to be larger and more 
profitable than originally projected. According to a December 7, 1994, 
New York Times article, deep water reserves are thought to hold 50 
percent more oil than the giant Prudhoe Bay fields in Alaska, as much 
as 15 billion barrels.
  In the November 21, 1994, issue of Forbes magazine, Shell and British 
Petroleum officials stated that they could develop the first 500 
million barrels from the 2,933-foot deep MARS field in the gulf at a 
cost of only $3 per barrel. Thus, even though the deep water fields are 
expensive, they are large enough that the per barrel production cost is 
exceedingly low, generating plenty of profit and reducing any 
justification for royalty relief or tax breaks.
  Moreover, the technology is constantly improving, as noted in the 
Wall Street Journal on January 25, 1995: ``Industry executives believe 
tension leg-platforms can be affordable in water as deep as 6,000 
feet.''
  As a result of these disclosures, it was with some consternation that 
I read in the March 24, 1995, edition of The Energy Daily that some 
congressional leaders and some officials in the administration are 
supporting a proposal to reduce substantially royalties owed on deep 
water oil and gas leases on public lands in the Gulf of Mexico.
  The new legislative proposal, S. 158, would provide a royalty holiday 
for producers that drill in deep waters in order to ``revitalize the 
domestic oil and gas industry.'' Under this ill-conceived scheme, the 
U.S. Department of the Interior would forgive all royalty payments owed 
to the Federal taxpayer until all drilling expenses have been 
recovered.
  This royalty relief, in addition to the extremely favorable tax 
treatment the oil and gas industry already enjoys, would make for a 
very generous gift during a time of fiscal constraint. According to a 
Congressional Research Service analysis provided to the Natural 
Resources Committee last year, the current effective tax rate for oil 
and gas companies is 17 percent, and independent oil and gas producers 
are estimated to enjoy an effective tax rate of zero, due to the 
benefits of depreciation, depletion allowance, alternative minimum tax, 
and other tax credits which the industry is allowed under current law.
  Last week, many of us in this House were shocked when we heard 
Republican Members use animal analogies to justify cutting off aid to 
poor- and middle-class families. Not only were these arguments 
offensive, they highlight the hypocrisy in the Republican approach to 
Government.
  If the majority truly want to end the cycle of dependence, why not do 
so for the richest in our society, not just for the poorest? Why, at a 
time when working people are increasingly living on the economic edge, 
do we need to give multibillion dollar tax breaks to multinational 
energy conglomerates to do what they are already doing: drilling for 
oil?
  And, never satisfied with a limited corporate tax break when a bigger 
one will do, some in Congress now are planning to expand the unneeded 
royalty relief to environmentally important waters in Alaska.
  The American people are not interested in cutting social welfare 
programs in order to pay for corporate welfare. They are justifiably 
tiring of high-priced lobbyists securing lucrative tax breaks and 
special treatment from the Republican leadership while those too young, 
too poor, or too weak are told they must sacrifice more.
  The oil industry is already proceeding with and profiting from deep 
water development without additional royalty relief. We shouldn't be 
bribing them to do what they are doing already.
  The royalty holiday is a paid vacation for the oil industry, and a 
bad deal for the taxpayer.


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