Dunno. I’m required to answer some theoretical absurdity before hearing the rationale behind offering new OCS leases to companies that won’t renegotiate royalty-free ones?

¿Por qué?

Absolutely. It also ignores the up front payments made by the companies made to acquire the leases.

Look at the oil company profit margins. You brought the GAO study into the discussion, not me steve. It states the typical royalty rate varies between 12.5% and 16.5%, I believe. That’s for unrefined product, but if you assumed an entire company’s production came from these leases, steve, what would the impact of imposing a new royalty be on that entity’s profitability.

Look at that and then answer your own question.

The preceding paragraph:

“In October, 2004, MMS estimated the cost of not including price thresholds on the 1998 and 1999 leases could be as high as $10 billion.”

From the next paragraph:

“MMS estimated in October 2004 that if price thresholds are disallowed for leases it issued in 1996, 1997 and 2000, an additonal $60 billion in royalty revenue could be lost.”

All taken together (p.7):

“Assessing the impact of royalty relief is an inherently complex task, involving uncertainty about future production and prices. In 2004, MMS preliminarily estimated that foregone royalties on deepwater leases issued under the act from 1996 thru 2000 could be as high as $80 billion dollars.”

The government’s negotiating with little success and not from a position of strength.

Any chance we deliberate the rationale for royalty forgiveness – with prices up 600% and vastly improved technology – rather than cherry-pick from the GAO study?

Should companies be awarded any new OCS leases before they renegotiate non-royalty deepwater leases?

steve – Please forgive my mistake in misinterpreting why you posted a solicitation from an oil and gas partnership syndicator, kept highlighting alternatively an $80 billion or $60 billion future cost to the U.S. Treasury when the actual cost to date is only $1 billion, insisted on dishonestly calling something a subsidy when no cash payment is involved like other subsidy programs like the farm subsidy programs, and your general lack of understanding of how business work.

I don’t understand how I could have been so wrong. I apologize.

No.

The proposition to grant royalty-free leases in perpetuity was boneheaded. Has nothing to do with “trying to demonize the oil industry.” No company should be awarded any new leases unless they renegotiate non-royalty leases.

From your GAO study page 7.

“A second mechanism that can be used to limit royalty relief and safeguard against giving away all royalties is the price threshold. A price threshold is the price of oil or gas above which royalty relief no longer applies. Hence, royalty relief is allowed only so long as oil and gas prices remain below a certain specified price. At the time of the passage of DWRRA, oil and gas prices were low—West Texas Intermediate, a key benchmark for domestic oil, was about $18 per barrel, and the average U.S. wellhead price for natural gas was about $1.60 per million British thermal units.”

“As with the application of royalty suspension volumes, problems arose with the application of these price thresholds. From 1996 through 2000—the five years after passage of DWRRA—MMS issued 3,401 leases under authority of the act. MMS included price thresholds in 2,370 leases issued in 1996, 1997, and 2000 but did not include price thresholds in 1,031 leases issued in 1998 and 1999.”

“MMS also estimated that through 2006, about $1 billion had already been lost.”

Trying to understand the issue more clearly would serve you better than just trying to demonize the oil industry.

This is a potential $60 billion that Americans stand to lose in royalty revenue over the life of these leases.

If the environmentalists hadn’t killed nuclear in this country

‘Twasn’t “environmentalists”. It was that traitress (Traitoress? Traitrix?) Hanoi Jane and Jack Lemmon in a movie that overblew the dangers, literally just a few weeks before the essentially harmless* accident at Three Mile Island.

* – yes, I said “essentially harmless”. There was a high amount of radiation released, but very little harmful radiation and the government reports have shown that there have been no unusual increases in incidences of cancer or other radiation-related ailments. (link)

“Detailed studies of the radiological consequences of the accident have been conducted by the NRC, the Environmental Protection Agency, the Department of Health, Education and Welfare (now Health and Human Services), the Department of Energy, and the State of Pennsylvania. Several independent studies have also been conducted. Estimates are that the average dose to about 2 million people in the area was only about 1 millirem. To put this into context, exposure from a full set of chest x-rays is about 6 millirem. Compared to the natural radioactive background dose of about 100-125 millirem per year for the area, the collective dose to the community from the accident was very small. The maximum dose to a person at the site boundary would have been less than 100 millirem.“