Taxpayers Not Getting Fair Returns From Energy Subsidies

Taxpayers can end up handing out billions in taxpayer money to energy companies, but the government fails to ensure we receive the fair market value for commercial development of public lands.


| June 9, 2010



Oil Drilling

The oil and gas industries will receive subsidies that will cost taxpayers as much as $50 billion in lost revenue during the next 25 years.


PHOTO: ISTOCKPHOTO

Early June brought scorching heat to much of the country, straining air conditioning (taking out a unit here at Taxpayers for Common Sense) and leaving people hot, sweaty and sun-drenched. Hopefully that abundant solar energy will remind Congress and the Administration to enact legislation to require adequate payment to taxpayers for renewable energy projects constructed on federal lands.

With the ongoing oil still crisis in the Gulf of Mexico, Washington has been abuzz with the political theater of hearings, hearings, Presidential speeches and more hearings. Not surprisingly, amid all of the hoopla, energy legislation that has been moribund for more than a year will find new life.

As energy legislation advances, the Administration is starting to process a large backlog of renewable energy applications going back years. The Bureau of Land Management (BLM) has identified 31 renewable energy projects (14 solar, seven wind, three geothermal, and seven transmission) as likely to successfully complete full environmental analysis and public review this year and has put them on a “fast track.” These projects will put the agency on track to meet a Congressional target of 10,000 megawatts of new renewable power from public lands by 2015.

But hard-won experience reveals that taxpayers can end up effectively handing out billions in corporate subsidies when government fails to ensure we receive the fair market value for commercial development of public lands. Subsidies that taxpayers can ill afford when facing the yawning budget deficit. Let’s review a couple examples:

Exhibit A: The 1995 Deep Water Royalty Relief Act (DWRRA) provides royalty “relief” for certain drilling leases in the Gulf of Mexico. At the time the law was passed, oil and gas prices were only $18 a barrel. With oil prices hovering near $80 a barrel, DWRRA has become one of the biggest subsidies the oil and gas industries receive, costing taxpayers as much as $50 billion in lost revenue during the next 25 years.

Exhibit B: Under the General Mining Law of 1872 , unchanged for nearly 140 years, billions of dollars of gold, uranium, silver, and copper are taken – royalty-free – from public lands each year. The 1872 law also saddles taxpayers with the hefty clean-up costs of mining operations. Estimated cost to taxpayers: upwards of $50 billion.





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