Offshore Oil Industry Gets Breaks From Washington The federal Minerals Management Service collects revenues from oil production on federal lands. But the MMS record on royalties and leases is one of deference to the industry. The past 30 years show the offshore oil industry winning a long series of breaks engineered by Congress, the White House and MMS.
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Offshore Oil Industry Gets Breaks From Washington

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Offshore Oil Industry Gets Breaks From Washington

Offshore Oil Industry Gets Breaks From Washington

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MELISSA BLOCK, Host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.

ROBERT SIEGEL, Host:

And I'm Robert Siegel.

H: And when it comes to collecting revenue, its record is one of deference to the oil industry, as NPR's Peter Overby reports.

PETER OVERBY: The industry says that analysis is defective and the system works. Erik Milito is with the American Petroleum Institute.

BLOCK: It seems like it's a pretty good system for balancing the encouragement of domestic oil and natural gas development with making sure the taxpayer gets the fair value. Anytime you make tweaks, you're going to have changes in investment decisions.

OVERBY: In 1983, Washington upset the laws of supply and demand. The Reagan administration opened most of the Gulf of Mexico for exploration and started auctioning off millions of acres at a time. It became common for leases to draw just a single bidder. As recently as the lease sale last March, 468 tracts were leased, only six got as many as three bidders.

BLOCK: We're leasing nine times as many acres as we were, and we're still getting fewer dollars than we got before.

OVERBY: That's William Freudenburg, a former scientific adviser to MMS. He co- authored a study of the lease prices. It shows that after the 1983 changes, the average price per acre declined by 88 percent. Freudenburg says one problem involves knowing what a lease might be worth. The oil companies have the resources to find out, MMS does not.

BLOCK: The people who represent us, the people, pretty much are flying blind.

OVERBY: Danielle Brian is director of the Project on Government Oversight, which has examined the offshore oil business.

BLOCK: They would tell the government one thing, in what they owed in royalties. But then when they were talking to each other, within industry, they were acknowledging actually what they owed was much more.

OVERBY: There is a government watchdog for MMS. It's the inspector general for the Department of the Interior. In March 2009, Acting Inspector General Mary Kendall told a House committee about her findings.

BLOCK: We found that DOI is at risk of losing millions of dollars in royalties. The existing process is heavily reliant upon companies doing the right thing.

OVERBY: At the American Petroleum Institute, Erik Milito says the companies, too, want MMS to work properly.

BLOCK: The MMS needs to be out there enforcing the regulations and everything has to be transparent. The industry wants certainty, consistency, transparency.

OVERBY: Peter Overby, NPR News, Washington.

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