Royalty Relief Language Hitches a Ride with Appropriations Bill -- For Now

House appropriators yesterday accepted a Democratic amendment that seeks to reform federal royalty relief incentives offered to deepwater Gulf of Mexico oil and gas producers, but the restrictions may not survive on the House floor.

The plan by Rep. Maurice Hinchey (D-N.Y.) was accepted by voice vote during yesterday's markup of the fiscal 2007 Interior and Environment spending bill. The Democratic amendment mirrors legislation, H.R. 4749, offered in February by Rep. Ed Markey (D-Mass.) and cosponsored by several other Democrats, including Hinchey (E&ENews PM, Feb. 15).

Aides on both sides of the aisle said they expect a Republican attempt to strike the language once the appropriations bill hits the House floor, which could be as early as next Wednesday. A point of order could be raised against the language if it is left unprotected by the House Rules Committee.

Appropriations Committee ranking member David Obey (D-Wis.) was skeptical his panel could solve the royalty issue via this or any other amendment. "This issue will not be resolved on this bill," Obey said. "This is likely to be dropped by the time we get to conference."

Obey did say the amendment would put pressure on the authorizing committees to act.

Rep. Jack Kingston (R-Ga.) described the language as a "bookmark" that will likely be changed as the appropriations process continues. "In the short term, it will send a message," he told reporters. "In the long term, it will give the president one more tool in negotiation."

As passed by the Appropriations Committee, the plan would require suspension of royalty relief from future production on leases any time the price of oil is above $34.71 per barrel for four weeks. The same bill would apply to natural gas when the wellhead price is above $4.34 per thousand cubic feet for four weeks.

A second part of the amendment calls for Interior to renegotiate certain existing leases that allow companies to avoid royalties. Supporters say this is aimed at leases in 1998 and 1999 that did not contain "price threshold" language that allows the Interior Department to waive the relief when energy prices rise above certain levels.

This section initially contained language that would pressure leaseholders to renegotiate with Interior, because failing to would make them ineligible to buy future federal leases. But the language barring the ability to buy future leases was removed during the markup though a second-degree amendment from Kingston.

Markey chastised the GOP amendment, saying it weakens Interior's ability to renegotiate leases. "We need to give the secretary a big stick as she attempts to recoup some of the billions and billions of dollars in losses to the American taxpayer over the next 25 years," said Markey in a statement. "For the Republicans to attempt to take the teeth out of that renegotiation is unconscionable."

Despite that, Hinchey told E&E Daily the amendment "has teeth" and would get Interior and oil companies to the table. "It will provide the push that is necessary to get these oil leases renegotiated," Hinchey said, who did not rule out bringing the original language up on the House floor next week.

The group Friends of the Earth yesterday called for the amendment to be included in the final appropriations bill. "We also urge Congress to strengthen the language by making it clear that oil companies who fail to renegotiate leases with the Interior Department won't be eligible for future contracts," the group said.

The amendment is aimed at recouping what could be billions of dollars in royalty payments that Interior will not receive as a result of the absence of price thresholds. A Government Accountability Office draft analysis in March found that the issuance of leases without price thresholds -- which Interior has called inadvertent -- will bring an estimated revenue effect of $10 billion (Greenwire, March 29).

Most Interior Department cuts left unchanged

The committee made few changes to the funding levels for fiscal 2007 set by the Interior and Environment Appropriations Subcommittee a week earlier that cuts nearly $275 million from Interior and the Forest Service.

Overall, Interior would receive $9.65 billion -- $211 million below fiscal 2006 and $40 million above the Bush administration's request.

Cuts include $100 million to the National Park Service budget, bringing total funding to $2.2 billion, or about $19 million more than the administration's request. The mark includes an additional $41 million for park base operations, a repeated concern of the subcommittee, which recently received a Government Accountability Office report detailing budget shortfalls at several major parks.

Most of the requested NPS cuts are the result of the proposed elimination of the $30 million Land and Water Conservation Fund stateside grant accounts, and other LWCF accounts did not fare much better. The mark includes a 27 percent cut to the State Wildlife Grants Program at $50 million, $24 million less than the administration's recommendation.

For the Forest Service, the agency would receive $4.2 billion, $63 million below fiscal 2006. The Forest Legacy program would receive $9.3 million, far below the $62 million request from the Bush administration. The $9 million Forest Service economic action program would also be eliminated.

The panel did add $31 million to the USFS account for forest health programs, for a total of $127 million, and added $40 million for road maintenance, for a total of $133 million.

The Fish and Wildlife Service would be cut $55 million to $1.3 billion, about $2 million below the administration request.

The subcommittee also added $5 million for the planned Flight 93 memorial in Pennsylvania, after members of the families who died on the flight on Sept. 11, 2001, raised public pressure on Subcommittee Chairman Charles Taylor (R-N.C.).

Amendments accepted

The committee accepted a handful of Interior-specific amendments, including:

  • Language from Rep. John Doolittle (R-Calif.) that would encourage the National Park Service to complete "in an efficient and timely manner" studies of personal watercraft use in 21 national parks.
  • An amendment from Taylor and Dicks adding $12 million to the Payment in Lieu of Taxes account from the Smithsonian budget. Total PILT funding would be $230 million in fiscal 2007.
  • Language from Hinchey directing Interior to report on the timetable and costs of changing regulations for federal and Native American natural gas leases, and to institute more accurate measurement and reporting of natural gas production values on public lands.
  • Language from Rep. Mike Simpson (R-Idaho) supporting the First Tee partnership with the National Park Service in Washington, D.C.

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