Wednesday, September 10, 2008

Sex, drugs and royalties...

Wide-Ranging Ethics Scandal Emerges at Interior Dept Evidence has surfaced of high jinks and frat-house behavior at the Denver office of the Minerals Management Service , the arm of the federal government that collects royalties from companies that exploit minerals on federal lands to the tune of approximately $10 billion per year (the largest non-tax revenue stream to the government). Sex, drugs, bribes.... This blogger is waiting for the opponents of drilling to start to wave this around as prima facie evidence of the evils of drilling!

At least the blathering about a 'windfall profits' tax has subsided a bit as oil prices (and thus gas prices) have dropped and the campaigns have moved on to other topics. Note: the oil companies pay royalties to the government for oil that they get from federal and Indian lands (which accounts for approximately 33% of the domestic oil production total) - usually a royalty of 12% for onshore production, and a royalty of 16.66% on the outer continental shelf (assuming that the Secretary of the Interior has not adjusted the royalty rate, which he can do at his discretion). The royalty payments may be either in cash or as Royalty-in-kind (RIK) i.e. the delivery of the appropriate amount of crude to the Strategic Petroleum Reserve (SPR). It seems to this blogger that as the price of oil increased from about $60/barrel up to the recent high of $147/barrel the federal government has already been sharing in the 'windfall profit.'