Regulations for oil industry lax

When discussion of oil arises, it often provokes heated debate from both sides of the political spectrum. There are environmental concerns, rising prices with which to contend, the threat of dependency and political ramifications that result from becoming embroiled in particularly rebellious or violent regions.

President Barack Obama’s recent decision to expand offshore drilling has caused more raised eyebrows than a mouse riding a saddled cat riding a saddled dog (Side note: There is a man who has actually taken to parading this combination around the downtown area.) However, I will neither be discussing the prospect of increased drilling nor the odd, mounted animal extravaganza. Instead, this article is a response to a recent piece in The New York Times about royalties in offshore drilling cases that are not being received by the U.S. government.

A 1995 law, which is being contended by Rep. Edward Markey, D-Mass., granted absolution from payment of royalties for companies that were participating in offshore drilling in the Gulf of Mexico. At this time, prices were extremely low, thus production was highly valued. However, faulty wording has apparently left a loophole in which a threshold, which was supposed to reinstate the payment of royalties when prices rose near $30, was determined to not apply to well sites built after 1996.

A federal judge has ruled on the case, and royalty payments have been returned, or in some cases, not paid at all. While this situation is certainly detrimental to the income of the U.S. government and for taxpayers who are bearing a large portion of this burden, it is not something to simply look upon with dismay. Mistakes in the writing of legislation should be taken seriously. In a time when the U.S. is struggling to maintain its economic health, it is important to shore up revenue wherever possible.

This issue of legislative loopholes is one that has fallen into common discussion with consistent debate about the intention in the Constitution and what the founders of this country originally hoped to accomplish. In an era plagued by over-analysis of semantics and thorough reading “between the lines,” it is overtly necessary that legislative errors be addressed immediately. If offshore drilling is to expand, it should be clear in the language of contractual agreements that royalties and fees be correctly apportioned. It is one thing to deal with foreign companies, which may differ in their own domestic laws, but the majority of those exempt from these royalties are actually private, domestic companies. This fact exposes a more important issue, the distribution of profit.

This development in the matter of unpaid royalties highlights the startling truth that executives in these oil companies are receiving an incredible benefit. They are essentially receiving bonuses for drilling while prices are high, something that would be intuitive for any entrepreneur. Unfortunately, this practice will lead to a very present comparison for most Americans. The recent bailout of the financial sector has led to disgruntled workers everywhere. After this economic decline, no one wants to see the super-rich doing even better. But, as was stated perhaps too often, the financial industry was believed to be “too big to fail.” The same analysis can readily be made about the oil industry, which ties us in both economically and politically to the larger international sphere.

In order to maintain and strengthen its credibility, the U.S. government needs to stifle the royalties issue immediately, whether it be through the restructuring of these offshore contracts or through the simple prevention of such a situation occurring again. Though this is not a traditional “bailout” as many would see it, the proposition is the same: A high-profit industry is benefitting from the taxpayers in a move which helps the already wealthy. Our lawmakers and representatives must be conscious of this perception, but also of the reality that the deficit is high, economic contraction is occurring, and these issues must be dealt with immediately and prevented to ensure a better future. A change in laws may not be possible, but the implementation of laws in the future would at least provide the American public with the confidence that the government can represent the interests of all and not just the elite.

Matt Boaz is a senior political science major from Edmond, Okla.