Senate Democrats

Pelosi and Reid: Oil Companies Must Pay Fair Share to Drill on Public Lands

Washington, D.C.House Democratic Leader Nancy Pelosi and Senate Democratic Leader Harry Reid wrote today to the Congressional Republican leaders urging them to act on Democratic legislation that would encourage oil companies to renegotiate royalty-free leases on public off-shore lands. Currently, many oil and gas leases in the Gulf of Mexico do not include price thresholds, an oversight that could result in a $20 billion revenue loss over the next 25 years. In stating their case for congressional action, the Democratic Leaders expressed their concerns over the pace of Interior Department’s effort to renegotiate leases given the Department’s known ethical troubles and the Bush Administration’s close ties to Big Oil.

The text of the letter follows:

September 15, 2006

The Honorable Bill Frist

Majority Leader

U.S. Senate

SH-509 U.S. Capitol

Washington, D.C. 20510

The Honorable J. Dennis Hastert


U.S. House of Representatives

H-232 U.S. Capitol

Washington, D.C. 20515

Dear Majority Leader Frist and Speaker Hastert:

We are writing to urge you to act immediately to ensure that American taxpayers are fairly compensated for oil and gas leases in publicly-owned waters. With oil companies reaping record profits and consumers paying record prices at the pump, it is critical that Congress act to ensure that the American people receive appropriate payment for oil and gas development on public lands.

As you know, in 1998 and 1999, the Department of Interior failed to include price thresholds in Minerals Management Service oil and gas leases in the Gulf of Mexico. This lapse in royalty collections has cost American taxpayers $2 billion and could result in a $20 billion revenue loss over the next 25 years, according to the Government Accountability Office (GAO).

While Interior Department representatives have stated that they are working with oil companies to voluntarily renegotiate these leases, we see little reason for confidence in their ability to protect the interests of the American people over the interests of the oil industry. In recent testimony before the House Government Reform Energy Subcommittee, Interior Department Inspector General Earl E. Devaney referenced “ethics failures on the part of senior department officials” and stated that “short of a crime, anything goes at the highest levels of the Department of the Interior.” Given these statements, and considering the Administration’s history of acquiescing to the desires of Big Oil, Congress must act.

House and Senate Democrats have offered a viable solution to this inequity. Democrats offered amendments to the FY 2007 Interior appropriations bill that would press the industry to renegotiate these contracts. Congressman Ed Markey and Senator Dianne Feinstein have also introduced legislation that would provide incentives to companies to renegotiate these royalty free leases by preventing companies holding the leases from purchasing future leases from the federal government.

The renegotiation of these contracts is all the more critical given recent reports of new oil discoveries in the Gulf of Mexico by Chevron and its partners. Test wells drilled in these areas reveal that this new source may hold between 3 and 15 billion barrels of oil. Because some of these leases lack price thresholds, these companies would avoid royalties on up to 87.5 million barrels of oil of up to $1.5 billion.

At a time when oil companies are making record profits and our nation is experiencing an energy crisis, the American people deserve to be adequately compensated for private development of publicly-owned submerged lands.

We urge you to act on legislation to renegotiate these leases before Congress recesses. Thank you for your attention to this matter. We look forward to your response.


Nancy Pelosi

House Democratic Leader

Harry Reid

Senate Democratic Leader

# # #