U.S. Has Royalty Plan to Give Windfall to Oil Companies

WASHINGTON, Feb. 13 — The federal government is on the verge of one of the biggest giveaways of oil and gas in American history, worth an estimated $7 billion over five years.

New projections, buried in the Interior Department’s just-published budget plan, anticipate that the government will let companies pump about $65 billion worth of oil and natural gas from federal territory over the next five years without paying any royalties to the government.

Based on the administration figures, the government will give up more than $7 billion in payments between now and 2011. The companies are expected to get the largess, known as royalty relief, even though the administration assumes that oil prices will remain above $50 a barrel throughout that period.

Let's see...

The government is going to allow oil companies to develop resources on federal land. This development will likely have a positive impact on fuel prices (supply goes up, prices go down) and will ease at least a bit of dependence on foreign oil. And in order to ensure that this move impacts the oil markets as directly and significantly as possible the government will not be confiscating part of the profits. Because if they did that would only drive up the expense of exploiting the resources, and American citizens would be paying more.

So what exactly is wrong here? The New York Times article quoted above certainly puts a negative slant on the story, and the left is predicatbly up in arms about it. Because, you know, helping oil companies is bad and stuff.

Which makes me wonder just how many of these people actually understand the way these markets work. They crow about "war for oil" in Iraq and "ending our dependence on foreign oil," yet when our government moves to make it easier to develop domestic supplies of oil they get all bent out of shape about that too. What do they want? Some magical invention to drop out of the sky to provide us all with the power we need to make our country and our economy run? I hate to break it to them, but that ain't gonna happen.

There is hope for ending our dependence on oil, and we should certainly pursue technology that will put is in a better energy situation both economically and environmentally, but until that day comes oil is what we need. So why not make it easier to get that oil at home?