We’ve been treated to several weeks of oil company bashing by the Democrats for the tax breaks provided to encourage exploration. In another article I detailed how “big oil” makes less than most industries on a per-unit basis. What I didn’t spend a lot of time doing is talking about royalties paid for oil that is produced on federally leased land.
Oil companies, like any other for-profit corporation, pays corporate income taxes, but what you may not understand is that they also pay significant money in royalties. I detailed this to some extent relative to oil produced outside the United States. What I didn’t explain is that oil companies pay the federal government royalties on every drop of oil or cubic foot of natural gas pumped out of federal leases.
The royalties paid per gallon of oil or cubic foot of gas produced on-shore is 12.5%. For $100/barrel of oil that’s $12.50; simple math, right? For off-shore leases, the oil and gas companies pay 18.75%.
Mining concerns, such as coal, iron and so on, get very cheap leases from the federal government, of no more than $5.00 per acre, while producing million upon million of profit. Most mining companies pay a royalty as well, like coal which pays an 8% underground royalty and 12.5% for above ground mining. But there’s a sector of the mining industry that gets a special deal and no one in Washington says a word, and that’s gold, silver, copper and uranium.
While the gold, silver, copper and uranium miners are paying for federal land leases, a special provision in law precludes them from having to pay a single penny in royalties on their federal leases. For starters I’m not opposed to this, so don’t get the impression that I’m complaining they aren’t paying royalties. I don’t think oil and gas companies should be paying any either. I’m just a little perplexed by the silence coming from the halls of Congress.
So why, with all the noise about tax breaks for oil companies that are returning billions of dollars in royalties to the U.S. Treasury, is no one highlighting the special mining deals. A news story by William Lajeunesse of Fox News brings it all to light. The following is an excerpt from Lajeunesse’s story from Fox News Online that gave me an “ah ha” moment:
In 1993, the House passed a bill imposing an 8 percent royalty, but Sen. Harry Reid, D-Nev., helped kill an agreement in the Senate. In 2007, West Virginia Rep. Nick Rahall helped pass a bill in the House that imposed a 4 percent royalty on gross revenue on existing operations and 8 percent on new operations. Again Reid stepped in, saying the House bill “won’t stand over here.”
“When you talk about collecting a royalty off the top, irrespective of production costs, that is an unsustainable situation,” said Carol Raulston of the National Mining Association.
In 2008, according to the National Mining Association, about $20 billion worth of metals were sold in the U.S. from mines here covered by existing law. With a 4 percent royalty, that translates into at least a $4 billion in payments for minerals owned by U.S. taxpayers.
“This is a pirate story with the public lands profiteers robbing the American people blind,” Rahall said in November 2007. “The robbery of American gold and silver must stop.”
But it hasn’t.
Since taking office, Reid has received $750,000 in campaign contributions from the mining industry, according to the Center for Responsive Politics. That number includes $127,000 from Nevada’s two largest gold producers in the 2010 election. Together, those two companies had profits of $5 billion last year yet they paid taxpayers nothing for minerals taken off public lands.
“Senator Reid through the years has aligned himself with those interests to thwart mining law reforms time and time again,” Ellis said.
While Ellis and others blame Reid, the mining association is happy to have him in their corner.
“Senator Reid is one among many who don’t want to see domestic mining killed off in this country,” Raulston said.
According to Yahoo Finance, three of the 10 most profitable industries in the U.S. right now are in mining, including copper, gold and silver, which enjoy a 47 percent net-profit margin. Oil and gas exploration, by contrast, ranks 50th with a net margin of 11 percent.
Yet oil and gas are singled out, particularly by Reid.
“We should all agree, in the interest of fairness, common sense and saving taxpayer money that we can cut out corporate welfare to those big oil firms who need it the least,” Reid said last week.
“Senator Reid has always been open to reasonable hardrock mining reform that protects jobs while ensuring the industry pays its fair share,” a Reid spokesman said. “However, I’d want to change the subject too if I had to defend billions in government giveaways to big oil corporations with gas prices so high in Nevada and across the country.”
How corrupt is our government? Are there any words that can truly convey the bought-and-sold nature of our government? The founders of our nation must spin in their graves at the graft that drips from the walls of Capitol Hill. We demand that federal justices recuse themselves from cases where they’ve had a personal or business involvement, yet our representatives and senators take money from whomever they want and then advocate for and even vote on rules, regulations and laws that benefit those contributors. What an embarrassment!Never in my entire life have I heard a politician come forward to state that they would oppose any legislator being involved in any action that might benefit a donor. Never! Because they all use that worm dangled from a hook to get donors to pay-to-play. It’s sickening. The first politician that comes forward with a legislation to block this government-sanctioned racketeering has gained my perpetual respect. The sad fact is that it’ll never happen.Harry Reid, your selfless dedication to lining your own pockets while portraying yourself as the champion of the little guys in your state is admirable. You turned yourself from a junior lawyer into a multi-millionaire during your time as a “public servant.” You not only sold your state down the river to build up your own fortune, but you sold your soul in the process. This is the leader of Democrats in the Senate…I hope all you liberals out there are proud. I’m certain the same can be said for numerous Republicans. A pox on both of your houses.This is why we have a Tea Party – or at least it should be. The root of all the spending, from both sides of the aisle, is the lure of money. Remove the invisible money transactions and the visible ones will dry up too.
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