WATCHING WASHINGTON STARVING THE CASH COW

May 4, 1992
With Patrick Crow The continuing political movement in Congress to banish offshore drilling not only will have a major effect on oil companies' spending plans but also on the Interior Department's budget. Two House committees recently approved amendments that would ban drilling off much of the U.S. coast, restricting the oil industry to the Gulf of Mexico and an occasional sale off Alaska (OGJ, Apr. 20, p. 44). If the full House approves those antidrilling amendments, the Bush

The continuing political movement in Congress to banish offshore drilling not only will have a major effect on oil companies' spending plans but also on the Interior Department's budget.

Two House committees recently approved amendments that would ban drilling off much of the U.S. coast, restricting the oil industry to the Gulf of Mexico and an occasional sale off Alaska (OGJ, Apr. 20, p. 44).

If the full House approves those antidrilling amendments, the Bush administration has threatened to veto the entire energy legislation package working its way through Congress.

Apart from that fight, the House appropriations committee likely will continue its yearly moratoriums that deny Interior the money to plan for certain offshore sales.

LOSS FROM 'PROTECTION'

Proponents of those drilling bans say they protect the coastal environment. It's obvious that in the long run they will force the country to import more oil. But the loss of bonuses, delay rentals, and royalties that just make the federal budget deficit worse is much less apparent.

The Minerals Management Service's annual mineral revenues report shows federal offshore revenues are plunging.

For many years, the offshore leasing program has been a cash cow for the Interior Department.

In most fiscal years, it made Interior the second largest source of revenue in the government-well behind the Internal Revenue Service, as any taxpayer can attest. In several years, Interior required no money from the Treasury. Instead, it gave funds to Treasury.

From 1953 through 1990, MMS collected offshore oil royalties totaling $18.5 billion and gas royalties of $21.3 billion. Delay rentals added $782 million.

The biggest source of offshore revenue has been lease sale bonuses, which were $55.8 billion during the period, giving the government a total of $96.3 billion from offshore operations through 1990.

Of course, those numbers don't include the secondary revenue effects to the government from producers' and service and supply companies' taxes and employment.

The MMS data also show how a withering offshore drilling program has slashed federal revenue.

In 1979 through 1984, MMS averaged nearly six offshore sales a year, gleaning average bonuses of $4.9 billion/year.

After attacks on offshore leasing, the government averaged only three sales a year in 1985 through 1990, whacking bonuses to only $788 million/year. Part of the drop, however, was due to reduced bidding because of low oil prices.

NO MENTION IN DEBATE

A Congress running huge deficits should pay attention to numbers like those, but they never are mentioned when committees debate offshore leasing bans.

Federal revenue losses are too coarse a subject for congressmen with an environmental mindset to consider. Besides, that's another committee's responsibility.

Now, to appease critics, MMS is about to release a bare bones, final 5 year leasing schedule that industry considers woefully inadequate (OGJ, Mar. 4, 1991, p. 16).

The cash cow appears to be doomed by starvation.

Copyright 1992 Oil & Gas Journal. All Rights Reserved.