Taxing Taxpayers Patience and Wallets
By Denise Best | Related entries in Blogging, In The NewsTaxpayers, apparently, taking it on the chin … again.
This time it’s natural gas and it sure has the potential of creating a big stink …
At a time when energy prices and industry profits are soaring, the federal government collected little more money last year than it did five years ago from the companies that extracted more than $60 billion in oil and gas from publicly owned lands and coastal waters.
If royalty payments in fiscal 2005 for natural gas had risen in step with market prices, the government would have received about $700 million more than it actually did, a three-month investigation by The New York Times has found.
But an often byzantine set of federal regulations, largely shaped and fiercely defended by the energy industry itself, allowed companies producing natural gas to provide the Interior Department with much lower sale prices – the crucial determinant for calculating government royalties – than they reported to their shareholders. As a result, the nation’s taxpayers, collectively, the biggest owner of American oil and gas reserves, have missed much of the recent energy bonanza.
Why more government, often doesn’t translate into more value for the taxpayer.
Yes, it can be argued that a large part of the problem resides with the seemingly unrestricted power of the energy industry; however one has to question what the function of federal regulation is in this arena.
Since then, the government has tightened its rules for oil payments. But with natural gas, the Bush administration recently loosened the rules and eased its audits intended to uncover cheating.
Industry executives deny any wrongdoing, arguing that the disparities stem primarily from different rules for calculating the sale prices for paying royalties and the sale prices for informing shareholders.
“The price of gas downstream is always going to be higher because you have costs that have to be recouped for getting it to the customer,” said Robert H. Davis, a spokesman for Exxon Mobil. “You have to process the gas. You have to transport it, and you have to sell it. There will always be a discrepancy there.”
Ok, natural gas is being touted as a “different animal” in regards to taxability consideration.
What incentive though is there for these companies to try and take out costs in getting the product to the customer?
The possible losses to taxpayers in gas could be even higher than the losses tied to the scandals over oil royalties. For one thing, natural gas production on federal land is worth twice as much as oil.
Moreover, the Interior Department has scaled back on full audits, pushed out a couple of its more aggressive auditors and been criticized by its own inspector general for the audits that it did pursue.
“We are talking about the same issues and in many cases the same players as before,” said Danielle Brian, executive director of the Project on Government Oversight, a nonprofit watchdog group that exposed many of the oil royalty scandals.
Now a situation such as this would, in my estimation, merit a review by special committee before some of the other issues (i.e. Plame) that have received an inordinate amount of attention.
Fellow taxpayers – what are your thoughts?
This entry was posted on Monday, January 23rd, 2006 and is filed under Blogging, In The News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
January 23rd, 2006 at 3:21 pm
Well, given the choice between getting $700 million additional dollars or investigating the Valerie Plame case, I have to go with the latter. Yes, it most certainly bothers me that the oil companies are not paying their fair share and in due time we should be taking a closer look.
However, with the federal budget outlays at around 2 trillion dollars, missing less than one half of one tenth of one percent of that value isn’t enough to make me notice. That’s like an average household misplacing two bucks a month. Sure, if I added it up, it might bother me. But it’s not enough for me to phone around and ask if anyone’s seen eight quarters. If the oil companies were forced to refund $700 million to the American people, I might be able to buy one gallon of their gas.
On the other hand, we have something where it appears that one portion of the federal government is playing fast and loose with ethics rules in order to possibly discredit or punish someone who disagrees with them. Is that what really happened? I don’t know. Shouldn’t we be investigating? After all, if it’s as bad as my admittedly shallow look at the ordeal shows, then it’s something that I’m really upset about and I demand accountability, just as I demanded accountability twelve years ago when the Democrats were bouncing checks and abusing postage stamps. (Quaint times then, weren’t they?)
I should ask you, Denise: Does the Plame incident really not bother you, or does it only not bother you because it’s an issue to the Democrats?
January 23rd, 2006 at 5:46 pm
Denise,
can you tell us how much the top 5 executives of the top 5 oil and gas companies make with all benefits. Should I think that they really care about the consumer of their products?
January 24th, 2006 at 2:36 am
Interesting questions.
Thoughts Denise?
January 24th, 2006 at 12:41 pm
Tim,
Thanks for your reply and perspective.
A couple of thoughts in response …
The extent to which the Plame case has taken on a life of its own, and at times been manipulated by political opportunism and media frenzy, has resulted in more convulation than revelation.
Truly, whether it would have been a Democratic or Republican administration my feelings would be the same – provided the coverage and manner in which the investigation has been conducted were identical.
There’s at least a direct ROI related to the natural gas taxation question and establishing a precedent by which driving costs out of the equation is incentivized would result in a degree of payback that might meet the criteria you’ve set forth in your discussion of the merits of pursuing this case ahead of others.
January 24th, 2006 at 3:19 pm
I can’t really buy the precedent argument. It applies just as much to Plame/Wilson as it does to natural gas. If we don’t investigate this and determine what really happened, then what signal does that send to future presidents about the role of the executive under the law?
I guess for me it comes down to the fact that I know that I expect oil companies to behave this way. I don’t like it or want to see it, but I know it’s how they operate. I count myself fortunate that I live in a midsized city that has a phenomenal public transportation system, so I only need to buy their product once a month or so.
However, I don’t expect the White House to behave this way. And since from my uninformed perspective, it appears that the White House is playing games with its opponents, I want to know if that’s what really happened. Unlike many sitting to the left of me, I don’t want my suspicions to be confirmed; unlike many to my right, I don’t think everything can be explained away with a wink and a nod.
I don’t really think that the Plame issue is one of national security. It’s a matter of security to one individual more than it is to all of us. HOWEVER, there is no excuse for using (even if it isn’t abusing) executive power in an attempt to destory the lives of your political adversaries.
The ROI on natural gas investigations can be measured in dollars. The ROI of thorough, proper, apolitical investigation into the Valerie Plame incident can only be measured in faith and trust of the United States government and continued success of the American experiment. That’s worth more than a few billion dollars to me.
May 20th, 2006 at 11:38 am
[...] Taxing Taxpayers Patience and WalletsDonklephant - May 18, 2006Well, given the choice between getting $700 million additional dollars or investigating the Valerie Plame case, I have to go with the latter. … [...]