The Bush administration is telling the American people that budgetary realities require more than 300,000 acres of Forest Service and Interior Department lands be sold, in order to raise $1 billion. It seems declining timber revenue from public lands is hurting rural school districts, mainly in the West, which are supposed to receive a cut of federal logging revenues.
Advocates insist that selling off these federal forests and rangelands is the only way to close this budgetary gap. At the same time, President Bush has proposed significantly smaller budgets for our national parks, wildlife refuges and other public lands, although the costs of managing these lands have risen steadily.
This penny-pinching might not have been necessary if the government hadn’t been giving away other resource revenues.
Oil companies are pumping oil and gas from public lands without paying full royalties back to the landlords – the American people. These royalty-free arrangements started during the Clinton administration when oil prices were relatively low. But these giveaways have continued and expanded during the Bush years even as oil prices have gone through the roof.
Typically, oil companies should pay between 12 and 16 percent of their output from public lands back in royalties. With the price of oil now above $68 a barrel, federal royalty revenues should also be skyrocketing, but they are not.
The reason is that, in 2000, when it should have been clear to everyone that “royalty incentives” needed to be reined in, the Bush administration pushed for more. Royalty relief was a centerpiece of Vice President Dick Cheney’s energy plan of 2001. Interior Secretary Gale Norton further eased royalty payments for natural gas producers in 2004. And last year, when Congress passed its vaunted energy initiative, even more royalty breaks to oil companies were again front and center.
The royalty-free deals to oil companies just for off-shore Gulf of Mexico crude will cost the federal treasury more than $7 billion over the next five years. The Government Accountability Office says the deals will cost taxpayers a lot more, a minimum of $20 billion over the same period. And if Kerr-McGee Corp. wins a lawsuit seeking expansion of royalty-free breaks, the total losses may exceed $80 billion.
Adding insult to injury, the Interior Department under Norton quashed detailed audits of oil company receipts, making it pretty much impossible to decipher whether companies are paying even the reduced royalties still owed to the taxpayer. The precise fiscal impact of this laxity is hard to estimate. But just one company’s financial sleight-of-hand cost the Treasury an estimated $700 million in one year. Interior contends that it does not have the staff to investigate.
Closing these loopholes would more than reverse the budget cuts facing the administrators of our federal lands. Even if none of the royalties from existing leases are recoverable, given pending court challenges, tightening future royalty deals would yield many billions, as few expect the price of oil to go down.
Even though some oil companies (as well as the president) concede that no more incentives are needed to stimulate exploration, the administration is stoutly opposing congressional efforts to close the royalty loopholes. Nor will the Republican congressional leadership allow an investigation into the royalty giveaways.
Royalty problems such as weak auditing are only part of the pattern of questionable actions by the Department of Interior under outgoing Secretary Norton.
There have been one-sided land exchanges, the mammoth and mushrooming tribal trust fund dispute (whose resolution Norton repeatedly called her top priority) and the surrender of reserved water rights in national refuges and parks without compensation. There also have been questions about the role of a Norton deputy in Indian gaming matters involving disgraced lobbyist Jack Abramoff.
Meanwhile, the natural resource protections that Interior is supposed to provide are reeling from cutbacks. Wildlife refuges are being closed (“consolidated” is the official term), and things have gotten so bad that the Park Service is even proposing to start soliciting donations from corporations and visitors.
While it may be a while before historians peel the onion of Norton’s tenure, the U.S. Senate has an immediate opportunity to remedy some of the most outrageous abuses as it considers the confirmation of her successor.
It’s encouraging that there has been strong bipartisan opposition in Congress to the proposed federal land sales. But, congressional critics of short-sighted oil and gas royalty policies must continue to press that issue as well.
The stakes for our national investment in the rich heritage of parks, refuges and rangelands could not be higher.
Jeff Ruch is executive director of Washington, D.C.-based Public Employees for Environmental Responsibility, a non-profit service organization for employees in state, local and federal resource agencies. Members include land appraisers, lawyers, inspectors and accountants in the Interior Department.
