[Mb-civic] Sharing the oil price windfall - Joseph P. Kennedy II - Boston Globe

[William Swiggard]

Sharing the oil price windfall

By Joseph P. Kennedy II  |  September 26, 2005

THE HUGE run-ups in energy prices have created record profits for oil 
and gas companies, refiners, shippers, and other players in the energy 
industry.

What may surprise many people is that one of the principal beneficiaries 
of the price spikes is the US government. When energy costs soar, the 
federal treasury sees massive infusions of royalties from energy 
companies for oil and gas extracted from federal lands and waters.

While the government collects a windfall, the poor just reap the cold. 
The federal treasury should not be making money off of elderly Americans 
and working families shivering in their homes during the winter.

It's time that every cent of unearned windfall goes toward fuel 
assistance for the poor. Using $25 a barrel as a baseline -- the 
mid-range of OPEC's preferred price band for crude oil -- the federal 
government ought to channel royalties collected on higher prices into 
energy aid for low-income households.

With crude oil prices now above $60 a barrel, the federal government 
earns over 200 percent more a barrel in royalties than it did during the 
2002-03 heating season, when prices hovered around $25 a barrel, and 62 
percent more than it did last year. In 2004, oil producers pumping crude 
from federal lands paid $1.5 billion in royalties to the federal 
government. The $12 a barrel premium above the baseline brought in a 
$500 million windfall -- all of which should go toward fuel assistance. 
Similar calculations ought to be made for coal and natural gas.

While royalties rise with fuel prices, energy companies also pay huge 
bonuses, as much as $1 billion in a single year, to the federal 
government in the competitive-bid process to extract the resources. 
Annual lease payments for development rights add hundreds of millions of 
dollars more. Both sources ought to contribute to fuel assistance as well.

Federal energy revenues, which have topped as much as $10 billion 
annually, derive from resources belonging to every American. Under 
current law, the federal government doles out half the royalties to the 
states from which the onshore oil and gas are extracted -- except for 
Alaska, which gets 90 percent. For off-shore production, Washington 
keeps 63 percent of the royalties from oil and gas pumped from waters 
within three miles of state shorelines and 100 percent for fossil fuels 
taken beyond the boundary.

A small portion of the federal revenue goes into conservation and water 
projects while the vast majority disappears into the treasury's general 
fund. It's wrong that multi-billion dollar transfers of energy wealth 
take place with no provisions for helping those struggling with rising 
energy costs. A provision in the recently passed energy bill authorizes 
the secretary of the interior to earmark some portion of royalties for 
fuel assistance. That doesn't go far enough. The full windfall should go 
to help the poor.

Just putting one-third of last year's $6 billion in federal offshore 
rents, royalties, and bonuses into heating assistance would double the 
Low Income Home Energy Assistance Program's $2 billion budget and 
restore the benefit's eroding value, which purchases just half as much 
heat as it did three years ago.

To middle-class households, higher energy prices mean less disposable 
income. But for the poor, higher prices and eroding benefits mean 
cutting back on necessities, huddling around the kitchen stove, using 
dangerous space heaters, closing off rooms to cut fuel bills, and 
wearing coats indoors. Child nutrition in poor neighborhoods 
dramatically declines during periods of cold weather and rising fuel bills.

http://www.boston.com/news/globe/editorial_opinion/oped/articles/2005/09/26/sharing_the_oil_price_windfall/
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