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Author Topic: More Giveaways to the Oil Companies!
Godot
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The recently-published budget plan for the Interior Department calls for the oil companies to be allowed to pump oil out of federal land for five years with no royalty payments.

Looks like we're getting shafted again to the tune of 7 billion dollars.

But I quess that's OK. The oil companies have really been hurting recently... oh that's right records profits.

But I guess that's OK. As long as they don't cut services in favor of... oh that's right, budget cuts.

But I guess that's OK. As long as they offset the revenue losses by repealing egregious tax cuts... oh that's right, they want to make them permanent.

But I guess that's OK. As long as they don't waste any MORE of our money... oh that's right, one billion more for Bush to propagandize his initiatives.

But I guess that's OK. At least they are taking care of Katrina victims and New Orleans... oh that's right, no money in the budget for New Orleans reconstruction and the victims are thrown out of hotels when there are 11,000 portable housing units sitting in FEMA's supply yards.

It never stops. Perhaps we should make all the poor and working people of America owners of oil companies and maybe then Bush will give a crap about what happens to us.

[ February 18, 2006, 04:59 PM: Message edited by: Godot ]

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WarrsawPact
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*sigh* Godot, I've been waiting for you.. [Wink]
quote:
But I quess that's OK. The oil companies have really been hurting recently... oh that's right records profits.
Well, if it was a matter of "hurting recently," why didn't I hear you clamoring for these drilling rights to be granted to the oil companies back when they were running many billions of dollars into the red? Don't lend corporate welfare so much credence.

quote:
But I guess that's OK. As long as they offset the revenue losses by repealing egregious tax cuts... oh that's right, they want to make them permanent.
It's your money. Not the government's.
Remember, you can't tax corporations. You can only tax people. Because they will always pass on their costs to the consumer.

And as for tax cuts causing revenue losses, that's pretty short-sighted. We've run budget surpluses (largely funded by surging corporate tax revenues) the last two months despite -- or is it because of? -- Bush's large capital gains tax cut.

You want to offset revenue losses? Easy. Cut spending. Cut hundreds of billions of dollars of spending. It's out of control.

quote:
But I guess that's OK. As long as they don't waste any MORE of our money... oh that's right, one billion more for Bush to propagandize his initiatives.
While that's a concern I share, it's hardly relevant to the issue at hand.

quote:
But I guess that's OK. At least they are taking care of Katrina victims and New Orleans... oh that's right, no money in the budget for New Orleans reconstruction and the victims are thrown out of hotels when there are 11,000 portable housing units sitting in FEMA's supply yards.
Frankly, while I sharply disagree with the logic of the government's actions in the area... we're helping many of them too much. We should extend them credit and give them the tools they need to rebuild their own lives, not subsidize rebuilding in inherently risky areas.

quote:
It never stops. Perhaps we should make all the poor and working people of America owners of oil companies and maybe then Bush will give a crap about what happens to us.
Aww, the old "poor and working people" sob.

Well, millions of Americans own stock in oil companies. They are, actually, owners of oil companies. In addition, when oil companies get to drill without paying royalties to the federal government, that brings down oil prices, which affects every poor and working American. In fact, the benefit falls heavily on working America.

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KnightEnder
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So gas prices should be plummeting soon, WP?

KE

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FiredrakeRAGE
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KnightEnder -

A difference of a billion dollars will result in a very, very small drop in gasoline prices. For one thing gasoline is a small portion of the oil industry, and for another thing, a billion dollars divided over a trillion gallons of gasoline comes out to almost nothing.

Secondly, I would note that WarrsawPact does not appear to be arguing that the oil subsidies are a good thing, merely that they will probably be effective in reducing gas prices.

I dislike Godot's arguments. His conclusion (that these giveaways are bad) seem perfectly valid. Government should not be subsidizing private industry unless it is related to a direct national security need.

--Firedrake

[ February 19, 2006, 12:32 AM: Message edited by: FiredrakeRAGE ]

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KnightEnder
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I work in the petrochem industry so I know what crude oil is used for, but I also know that the gas prices were artificially inflated and as you say we don't need to be subsidizing industries that are recording record highs in profit.

KE

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FiredrakeRAGE
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KnightEnder -

Artificially inflated? What, like they raised the price, and people still paid for it? [Smile] Or are you talking about the gas tax?

--Firedrake

[ February 19, 2006, 01:04 AM: Message edited by: FiredrakeRAGE ]

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KnightEnder
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I'm talking about them raising the prices because the King of SA has a tummy ache.

KE

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FiredrakeRAGE
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KnightEnder -

Ah. Yes.

--Firedrake

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Fel
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The question is, though, would they still be pumping the oil out if they had to pay an additional $7 billion in taxes? Would the economics still work and make it profitable?

There are billions of barrels of oil in the ground that don't get pumped out because it would cost too much. Only recently have the oil-sands become profitable. Before that they relied on huge government subsidies to survive (just like ethanol).

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TomDavidson
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quote:
why didn't I hear you clamoring for these drilling rights to be granted to the oil companies back when they were running many billions of dollars into the red?
When was the last time this happened, out of interest?

quote:
The question is, though, would they still be pumping the oil out if they had to pay an additional $7 billion in taxes?
We're not talking taxes, here. We're talking rent-free use of land. Basically, the Bush Administration is letting oil companies use our land for free, presumably because they can't "afford" to use our land otherwise.

[ February 19, 2006, 11:00 AM: Message edited by: TomDavidson ]

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WarrsawPact
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quote:
why didn't I hear you clamoring for these drilling rights to be granted to the oil companies back when they were running many billions of dollars into the red?

When was the last time this happened, out of interest?

TomDavidson

Read this.

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FiredrakeRAGE
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In this case, I would assume that we wish to have oil pumped (but not actually removed from the ground) in the United States for national security reasons. That would make decent sense. However, even presupposing that motivation, wouldn't it make more sense to pay the oil companies (via a bid-based contract) to set up and maintain oil pumps at strategic locations?

If the reason is national security, we need to keep the oil reserve – best place to keep it is in the ground. If we're just trying to reduce gas prices, the government (particularly the Republican government) should keep its nose out.

--Firedrake

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TomDavidson
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quote:
Our refiners posted losses of more than $1 billion in 2002.
Look at that a bit more critically, WP, and I think you'll see my objection. [Smile] Oil companies do not, in general, lose money.
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Fel
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quote:
We're not talking taxes, here. We're talking rent-free use of land. Basically, the Bush Administration is letting oil companies use our land for free, presumably because they can't "afford" to use our land otherwise.
Any money that ends up in the governments hands is a tax, whether direct or indirect. And again, it comes back to whether or not it would be profitable to extract and transport this crude if the cost (if you prefer that to tax) was an additional $7,000,000,000 higher. We import oil from across the world because that is cheaper than extracting it from shale or pulling the last amount of oil out of a well here in this country. Oil pumps get shut down not because the well has run dry, but because the cost of pumping out the last amount of oil is more then the money to be made from the oil.
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TomDavidson
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quote:
Any money that ends up in the governments hands is a tax, whether direct or indirect.
I'm not sure where you're getting this definition. Why do you feel this way?

quote:
And again, it comes back to whether or not it would be profitable to extract and transport this crude if the cost (if you prefer that to tax) was an additional $7,000,000,000 higher.
And if it WEREN'T profitable, they wouldn't extract it. I don't see a problem here. If it were in the national interest, we'd be asking them to give us the oil for free in exchange for using our land for free. But we're not.
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WarrsawPact
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... what?!

Who's going to offer to drill for free? Just for the privilege of using the land?

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Fel
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quote:
And if it WEREN'T profitable, they wouldn't extract it. I don't see a problem here. If it were in the national interest, we'd be asking them to give us the oil for free in exchange for using our land for free. But we're not.
Hm? The point I was trying to make here is it is only a $7 billion give-away if the oil companies were planning on pumping the oil anyways. If not, then it isn't a giveaway, but the government offering money to get them to act a certain way. The government does this alot with subsidies for ethanol, wind power, health insurance, home ownership, etc. Whether or not they should if a different issue.
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TomDavidson
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That's my point, Fel. Why are we subsidizing drilling when the economics don't warrant it? Is it worth $7 billion to us to get a trickle of current-day oil right now, when we don't need it as much as we'll need it a few years from now?
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Fel
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Maybe the government wants additional drilling infrastructure to pick up the slack for when we bomb Iran?
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TomDavidson
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Except that, as I understand it, this wouldn't even make a small DENT in that event.
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FiredrakeRAGE
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Fel said:
quote:
Maybe the government wants additional drilling infrastructure to pick up the slack for when we bomb Iran?
So why not contract the oil companies to place equipment to exploit a strategic reserve, rather than having them actually remove the oil?

--Firedrake

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IrishTD
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quote:
Any money that ends up in the governments hands is a tax, whether direct or indirect.
Attempting to answer TomD: Because if a business has an expense (doesn't matter if it's Exxon, Coke, McD's, WallyWorld, or anyone else), they pass that on to us. It really just makes the company the middleman -- they collect money from us and pass it on to the gov't. Might as well not charge them anything and take it straight from us.
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The Drake
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Disregard the below post, see apology in next post.

quote:
As far as leasing for free---

I'm sure there are all kinds of restrictions on how the oil companies can and can't access the property, which areas, etc. etc. That's why the government wants to retain control.

The right move is to SELL the land to the oil companies, and use the immediate proceeds to pay down debt and buy some time to figure out how to balance the budget.



[ February 20, 2006, 03:54 PM: Message edited by: The Drake ]

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The Drake
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Surprising that nobody has posted a link. I realized that my last post was entirely supposition and fabrication. I apologize for that. Now open up and take a big bite of the truth.

Billions at Stake

quote:
At issue are royalties, the percentage of the action that oil and natural gas companies fork over to the U.S. treasury for the privilege of drilling on federal lands. In 1995, when energy was cheap and the feds were trying to prod more Big Oil development, Congress gave companies a break on royalties if they sank money into risky exploration in the Gulf of Mexico's deep water. The carrot worked; the deepwater Gulf business now accounts for nearly 20 percent of U.S. oil production.

The Department of Interior's proposed budget projects the industry will pull $65 billion worth of fuel from the Gulf's deep waters through 2011. And the government will forgo $7 billion in royalties. But does the relief Congress offered at the market's nadir make sense at today's sky-high prices? "There is no need for an incentive,"says Republican Rep. Richard Pombo of California, chairman of the House Resources Committee. "They have a market incentive to produce at $70 a barrel."

Legal battle. In dispute is whether the Interior Department has authority to set thresholds based on the market price of oil to limit industry relief. Pombo and others say that was Congress's intent, and, indeed, the department earlier this month said that 41 companies had improperly claimed more than $500 million in 2004 royalty relief because prices had surpassed Interior's triggers. Nearly all companies agreed to pay up, but one, Kerr-McGee, has vowed to take the matter to court. A government loss in this high-stakes legal battle would mean $35 billion more in royalty relief through 2011.

So, in other words, the Government is backing out of an agreement it made to encourage Deep Gulf development in 1995 - which was supposed to extend through 2011. The excuse? "Because they're making plenty of money, and we'd prefer not to pay them." I don't consider that acceptable.

The Moral: Demand the money up front when you're dealing with shady Uncle Sam. We know how he likes to break deals, or haven't you heard?

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