No cost yet for '05 royalty relief

ryanteaguebeckwith — Wed, 13 Aug 2008 16:28:35 -0400

A royalty relief provision from 2005 has not cost the federal government anything so far.

A recent TV ad attacked U.S. Sen. Elizabeth Dole for voting for the Energy Policy Act of 2005, which included a provision to allow oil companies to avoid paying royalties for deep-water drilling in the Gulf of Mexico.

As noted previously, the ad's citation of a "$7 billion" cost estimate for that bill was inaccurate, as the editorial it quoted was referring to royalty relief given in the late 1990s.

But today, the U.S. Department of the Interior told Dome that the royalty relief provisions in the 2005 bill have not cost anything so far because unlike the earlier measures they included price thresholds that kicked in when oil prices rise.

The threshold for 2008 will be around $37 a barrel, but oil is currently selling for around $112.

Walter Cruickshank, the deputy director of the Minerals Management Service, said that the 2005 royalty relief will not really affect the federal budget or oil companies.

"As a practical matter, (it will cost) probably nothing," he said.

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No cost yet for '05 royalty relief