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.

Majority Action, a liberal 527 group created by two Democratic political consultants, is running a TV ad attacking U.S. Sen. Elizabeth Dole's record on oil issues.

What it says: The ad flashes corporate logos as ominous music plays and a narrator talks about Dole's record. "Chevron, $18.7 billion. BP, $20.8 billion. ExxonMobil, $40.6 billion. Big oil companies are making billions at our expense. And where has Elizabeth Dole been? In Washington, taking over a quarter-million in campaign cash from Big Oil and voting to give them billions more in tax breaks. Tell Elizabeth Dole we need lower fuel costs, not billions for big oil." Text on the screen reproduces phrases from two news articles: "Big Oil's Big Windfall ... a minimum of $7 billion and as much as $28 billion" and "$2.6 billion for oil and gas industries."

The background: Oil companies drilling on federal land typically pay a royalty fee.

In 1995, Congress created a royalty relief program for oil companies to spur production in the Gulf of Mexico. Waivers granted between then and 2000 added up to at least $7 billion in lost revenue for the federal government.

Dole was elected to the U.S. Senate in 2002.

As part of an omnibus energy bill in 2005, Congress extended some of the royalty relief provisions by another five years, but it cost far less than the previous measure. Dole voted for that bill.

Though an exact figure is not available, the Congressional Budget Office estimated that the extensions and several other provisions in the 2005 bill would cost the federal government about $200 million over the following five years.

(Update: The U.S. Department of the Interior says it has so far cost the goverment nothing.)

Apart from royalty relief, the 2005 energy bill included $2.6 billion in tax cuts for oil and gas companies, but it also included $2.9 billion in tax hikes — a net tax increase for the industry.

Congressional budget analysts say they do not consider the royalty relief program to be a "tax break," although it has a similar effect on the federal budget.

Dole has received $266,456 in campaign contributions from people associated with the oil and gas industry since 2002 and another $35,000 from oil and gas companies' political action committees, according to the Center for Responsive Politics.

Bill Buck, executive director of Majority Action, defended the ad, but did not offer any other specifics.

"We assert that Senator Dole voted for billions in tax cuts for the oil industry because it is true," he said in an e-mail to Dome.

Is the ad accurate? In large part, no. The ad does not back up its claim that Dole has given "billions ... in tax breaks" to oil companies. The $7 billion figure cited is wildly inaccurate, since it refers to legislation from before Dole's time in the Senate and is not even properly termed a "tax break." The $2.6 billion figure is also misleading, since it leaves out the offsetting tax hikes in that bill.

Correction: An earlier version of the post incorrectly described its founders.

A royalty relief measure in the 2005 energy bill is worth millions — not billions.

According to an analysis of the Energy Policy Act of 2005 by the Congressional Budget Office, the waivers for royalty payments on deep water drilling in the Gulf of Mexico and several other provisions in the bill would cost an estimated $203 million over five years.

Even that figure is high, since the budget office did not provide a breakdown of the oil and gas provisions included in the bill. 

Still, that's far, far below the $7 billion figure from a New York Times editorial quoted in a recent TV ad attacking U.S. Sen. Elizabeth Dole.

As noted previously, that article was referring to an earlier royalty relief bill that actually predated Dole's time in the Senate, so the $7 billion figure is wildly inaccurate.

After the jump, the math.

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The estimates for the cost of royalty relief are largely due to a 1995 law.

A recent TV ad attacks U.S. Sen. Elizabeth Dole for voting to extend the royalty relief program for deepwater drilling on federal lands in the Gulf of Mexico.

The ad cites a New York Times editorial that pegs the cost of royalty relief at $7 billion.

But the bulk of that cost estimate comes from royalty waivers granted under the Deep Water Royalty Relief Act of 1995 and under the Clinton administration in 1998 and 1999 — long before Dole was elected.

A separate New York Times article makes clear that $7 billion in lost revenue (on $65 billion worth of oil) came from the earlier royalty relief efforts:

The Clinton administration waived those price limitations for leases awarded in 1998 and 1999, however, and the Interior Department estimates that those leases will account for most of the $65 billion in royalty-free oil and gas pumped over the next five years.

To be sure, the Energy Policy Act of 2005 (which Dole supported) extended the royalty relief program, costing the federal government revenue, but not the $7 billion figure cited in the ad.

Dome is still searching for a cost estimate of the 2005 bill.

Royalty relief is not a tax break.

A recent TV ad attacking U.S. Sen. Elizabeth Dole argues that she has voted to give oil companies "billions ... in tax breaks."

But experts say that one of the measures cited in the ad is not exactly a "tax break."

The ad refers to the 2005 energy bill, which included extensions of a measure to allow oil companies to avoid paying the standard 12 percent royalty when drilling in the Gulf of Mexico.

Erich Pica, a researcher on oil issues for the Friends of the Earth, is not a fan of royalty relief, but he says he would not classify it as a "tax break" either.

"I tend to be very specific when I'm talking about tax breaks versus general subsidies," he said. "I consider (royalty relief) more of a subsidy," he said.

Taxes are levied on all corporations or individuals based on their activities, while a royalty is a specific charge for the use of a government resource.

Mark Holt, author of a Congressional Research Service report on the energy bill, said he did not consider royalty relief to be a tax break in his analysis.

The Congressional Research Service is basically the federal government's think tank.

As a legislative branch agency within the Library of Congress, the service writes reports on the effects of different bills for members of Congress, their committees and staff.

In a March 8, 2006, report on the Energy Policy Act of 2005, the research service concluded that the bill would actually lead to a tax increase for oil companies:

The $2.9 billion in energy tax increases, which increase the tax burden of U.S. refineries, offsets the $2.6 billion in tax cuts for the oil and gas industry as a whole. In fact, focusing only on refineries, their $2.9 billion in tax increases far outweigh the $400 million of tax cuts provided by the act (over 11 years).

A recent TV ad by Majority Action criticized U.S. Sen. Elizabeth Dole for voting for the act.

It is not clear whether the report includes the royalty relief in its calculations.

The 2005 energy bill had a little-discussed royalty relief provision for oil companies.

A recent TV ad attacking U.S. Sen. Elizabeth Dole's record on energy cites a New York Times editorial from March 28, 2006, on the vote.

Here's the background, from a March 27 story in the Times:

Starting in 1995, Congress began allowing oil companies drilling in deep water owned by the federal government in the Gulf of Mexico to escape the standard 12 percent royalty payments.

The law was supposed to include a safety valve to force companies to pay royalties when the price for oil or gas was high, but Clinton administration officials forgot to include the clause in leases it signed and a court decision in 2003 more than doubled the amount they could drill.

The Bush administration also raised the threshold on new leases before royalties would kick in.

In 2005, Congress debated a massive energy bill. Among its provisions was an extension of the "royalty relief" program for another five years and some new benefits.

House Republicans who pushed the provision argued that it would have no cost, but in February of the following year Bush administration officials pegged the cost at about $7 billion over five years, or as much as $28 billion if oil companies prevailed in another lawsuit.

A TV ad from 527 group Majority Action attacks U.S. Sen. Elizabeth Dole for receiving contributions from oil companies.