How Much Does BP Pay Us for Privilege of Soiling Our Shores?
The Mineral Management Service claims that revenues from oil production once became the country’s second largest source of revenue after income tax.
As the industry continued to evolve through the 1950s, oil production became the second-largest revenue generator for the country, after income taxes.
That’s a historical claim, though the American Petroleum Institute still pitches a version of it: “one of the federal government’s largest sources of non-tax income.” But it got me thinking about how much we’re actually getting from the oil companies, like BP, in exchange for them soiling our shores.
Last year, the Minerals Revenue Management department of the Mineral Management Service reported $9.9 billion in royalties from all mineral exploitation. Of that, MRM collected $5.8 billion for all federal offshore drilling of oil and gas.
$5.8 billion for exposing an ecosystem like the Gulf to the risk of the catastrophe that is now playing out. BP will pay more in liability or cleanup than that.
Of the $5.8 billion MMS brought in from offshore oil and gas drilling, $3.1 billion appears to come from oil, which is our share of the $23.5 billion in revenues for 425,199,067 BBL of oil drilled off shore.
Do the math. If I’m doing my math correctly, that means we’re getting less than $7.60/BBL for royalties the oil. That’s not all the money we get, mind you. There’s the actual bonus bid for the drilling rights and rent up until oil starts flowing; BP paid $34 million to the rights to this particular site. And starting in 2008, royalty percentages for Gulf leases were raised to 18.75%, but a lot of those leases aren’t producing yet. But using the $7.60 we’ve been getting for oil, taking the highest estimates for the rate of spill–70,000 BBL/day–and assuming it will spill for a total of 90 days, taxpayers would get less than $48 million in oil revenues for all that oil, enough to ruin the Gulf ecosystem for a generation, not to mention the serious damage to the fishing and tourist industries. While not all of the fishing and tourist industries will be destroyed, in 2008 all Gulf states brought in over $1 billion in fish, shrimp, and oysters, and $20 billion in tourism.
I realize weighing the oil gushing into the Gulf this way doesn’t account for the jobs the oil industry supports in the Gulf, but it is a testament to how cheaply we’ve exposed ourselves to the enormous environmental risk of oil drilling.
Now put BP’s presence in context. Last year, BP produced 387,000 BBL/day of oil in the deepwater Gulf (though more recent reporting says this has gone up to 450,000 BBL/day), and 665,000 BBL/day of oil total in the US. 15% of all of BP’s oil development last year came from deepwater drilling in the Gulf (though note, it partners with others on much of this driling). On top of that, it produced 303 million cubic feet/day in gas in the deepwater Gulf. It appears that Atlantis, the rig some are trying to shut down because of safety allegations, produced 2% of BP’s oil production last year, with the capability to go much higher. Here’s a description of the big projects BP has in the Gulf.
I’m having a tougher time figuring out how much of the drilling in the Gulf is BP’s. The Energy Information Administration says the US produced 1.6 million BBL/day in the Gulf last year, including drilling on state and federal lands. Which would mean BP’s 387,000 BBL/day coming out of the Gulf amounted to 24% of all Gulf production. But BP’s production would make a bigger percentage of the total offshore revenues MMS brings in–perhaps up to 33%. (Again, both these figures must include the caveat that BP partners with others on most of this volume.)
Whatever the number, BP accounts for a huge portion of the exploration going on in the Gulf right now. It’s by far the leader in the industry on this kind of deepwater drilling (see slide 30). Which may be a big factor in any discussion of what to do to BP.
Then there’s the other problem when considering how little money we get for letting BP soil our shores. MMS isn’t all that good at collecting the money that’s due taxpayers (though presumably far better than Department of Interior does for Native Americans). GAO testified in April 2009 that there were “questions about whether the federal government is collecting an appropriate amount of revenue for the rights to explore for, develop, and produce oil and gas on federal lands and waters.” In one study done in 2007, “the government take in the deep water U.S. Gulf of Mexico ranked as the 93rd lowest out of 104 oil and gas fiscal systems evaluated in the study.” Both of these GAO reports are worth reading in detail, for the explanation they give of how the finances for drilling works, and the description of what MMS is not doing that it could be to exert more control over the drilling.
I realize there’s a danger in looking at the dollars involved in federal royalties and drilling. It suggests there is a market price to put on potentially destroying the Gulf. But it highlights the way that oil companies are screwing Americans the same way they screw residents of oil countries around the world.
“Then there’s the other problem when considering how little money we get for letting BP soil our shores. MMS isn’t all that good at collecting the money that’s due taxpayers (though presumably far better than Department of Interior does for Native Americans). GAO testified in April 2009 that there were “questions about whether the federal government is collecting an appropriate amount of revenue for the rights to explore for, develop, and produce oil and gas on federal lands and waters.” In one study done in 2007, “the government take in the deep water U.S. Gulf of Mexico ranked as the 93rd lowest out of 104 oil and gas fiscal systems evaluated in the study.” Both of these GAO reports are worth reading in detail, for the explanation they give of how the finances for drilling works, and the description of what MMS is not doing that it could be to exert more control over the drilling.”
Yeah and on top of this rip off the U.s. overthrows leaders and countries who elect leaders who nationalize the oil industry
Not being an maritime attorney, I was wondering if there was any regulatory significance (or outcome) to the Deepwater Horizon having been a Marshall Islands-flagged vessel?
The registries typically hire everything done by ‘contractors’. Inspections if done, are probably done by a contractor, thus the usual questions might arise as to the selection of what is to be inspected for and so on.
Thanks for reminding us that it is all about the money, isn’t it?
Bob in AZ
Uggh! I would really like to know what people mean when they use the phrase “American Values”.
It’s nothing more than a Pavlovian dog whistle for the rubes.
Privatize profits socialize losses seems to generally be the theme song of Wall Street executives and profit sucking oil executives in the past.
Just keep thinking about Obama stumbling over the “3o day announcement”
Obama “We’ve ordered inspections of all deep water operations in the Gulf of Mexico. we’ve announced that no new permits for drilling new wells will go forward until the 30 day safety and environmental review I requested is complete”
http://ochairball.blogspot.com/2010/05/obama-announces-oil-spill-investigation.html
Wonder how those inspections of all deep water operations is going? How many of the 3,858 rigs in the Gulf qualify as “deep water” operations?
How Many Oil Wells Are in the Gulf? 3,858!
http://seminal.firedoglake.com/diary/49722
chief Executive of BP “modest”
http://www.youtube.com/watch?v=fr74q-3v75U&feature=youtube_gdata
From “modest” to BP Acknowledges Oil Spill Is Larger Than Previous Estimates
http://www.democracynow.org/2010/5/21/oil
An interesting fact in this recent NYT story “Interior Unveils Plan to Split MMS Into 3 Agencies”
Criminal Inquiries Look at U.S. Oil-Gas Unit :
Additional information on leasing issues among other problems in this Dec 15, 2006 NYT article “Criminal Inquiries Look at U.S. Oil-Gas Unit”
Also:
Link to Project On Government Oversight (POGO): “Drilling the Taxpayer: Department of Interior’s Royalty-In-Kind Program“
Yeah, I think that may be one of the reasons why we’re only getting 7.60/BBL. BP was, not surprisingly, the biggest beneficiary of Royalty Relief settlements.
Did all the partners on the lease in question renogiate?
The article “Pay, Baby, Pay” (link to cached version -Miller Mccune site down at this time?) by Bob Gramling and Bill Freudenburg dated June 17, 2009 at Miller Mccune.com discusses royalty rates and leasing issues.
The articles subtitle: “Before the U.S. responds to ‘drill, baby, drill’ campaign rhetoric with more offshore energy exploration, it should revise Reagan-era leasing and royalty rules that cost the Treasury billions.” appears to be correct.
The entire article is worth reading and will hopefully be accessible at the website http://www.miller-mccune.com/business-economics/pay-baby-pay-3633/
About the authors:
What the authors found concerning former Secretary Watt’s wide area leasing program:
About royalties in general compared to other resource owners Gramling and Freudenburg state:
Two GAO reports that provide further information on gas and oil leasing royalties are:
“Subject: Oil and Gas Royalties: A Comparison of the Share of Revenue Received from Oil and Gas Production by the Federal Government and Other Resource Owners“May 1, 2007 -15 page pdf.
“Subject: Oil and Gas Royalties: Royalty Relief Will Cost the Government Billions of Dollars but Uncertainty Over Future Energy Prices and Production Levels Make Precise Estimates Impossible at this Time“April 12, 2007- 16 page pdf.
Link to U.S. Energy Information Administration-
“Outer Continental Shelf Deep Water Royalty Relief Act of 1995“
Thanks for this post, Marcy. Information like this needs to be broadly disseminated.
The flip side of this is that the cost/value of the oil leaking, to them, is also not high enough. It does so little for their bottom line either way.
Yet, the savings to all of us, including to BP would have been enormous if they had been required to meet the safety demands.
What we are losing in terms of our shores and livelihoods is just HUGE. Except for the disaster capitalists, who win again.
FYI: National Geographic has a “2010 Gulf Oil Spill News and Pictures” page.
Relying on the post*s calculus $17.85 billion; $7.60/barrel royalties. Then 42 gallons/barrel; $0.18/gallon royalties.
In addition to royalties paid by the extractor, 21 of 22 oil producing states collect a so-called **severance tax** on oil, a topic which had allure for CA legislators interested in revisiting this locally contentious topic in 2010, given the partisan stalemates the Republican minority*s governor had sponsored over the past three budget cycles. CA local state senator LHancock*s page providing discussion of relevant issues, and comparison with, e.g., Alaska*s severance tax regime. CA does not have an oil severance tax.
In west FL the issue of opening eastern Gulf of MX to offshore drilling was a heated public discussion one year ago. That state*s democratic party caucus has an interesting, amply linked chronology of the current turmoil about topics oil, and extending back into the prior politicking in FL on the subject in 2009. See caucus page, linked.
Informationally, associate justice Souter wrote the 2008 opinion in Exxon v Baker, joined by Roberts, and variously otherwise fractured; the reparations regimes are reviewed in detail in the slip opinion of the consolidated cases 07-219. The Valdez cases are reviewed at scotuswiki, there.
One of the things I find interesting and curious about the US Gov’s response to this disaster is the role of Secretary of Homeland Security’s Janet Napolitano. Do you think those who wrote the laws establishing this new organization thought that it might be involved in managing an oil spill?
What is Homeland Security’s role? Or has Napolitano been looped into this because of her executive experience?
Bob in AZ
EW,
Are you following the blowout-major eruption news trying to be confirmed?
Yeah, but until it’s confirmed or until experts weigh in I remain open-minded about what it is.
I tried to find better confirmation on this until into the early morning hours, and again when I got up. Cannot find it. Something significantly worse certainly is a salient possibility I suppose; however, we have no hard evidence of that at this point. I do think there is something hinky about the live views that are being supplied. At one point last night I was checking out the BP feed via Livestream.com and it was looped from May 8 and at the same time, you could not see squat on the CNN version. So, I dunno what is up, if anything.
I think they’re called “blue barrels” because it’s a sad, sad way to run a country.
Sylvia Earle testified to Congress on May 19:
The original PDF file of Dr. Earle’s testimony is available here. Committee Chairman James L. Oberstar was “positively lyrical” and poetic. Here’s a bit more:
As an experience internet user, I would like to point out that the comment system here has technical flaws.
As an experienced Emptywheel user (got some on the net too), I would request specification of your gripes.
I think they’re called “blue barrels” because it’s a sad, sad way to run a country.
Sylvia Earle testified to Congress on May 19:
The original PDF file of Dr. Earle’s testimony is available here. Committee Chairman James L. Oberstar was “positively lyrical” and poetic. Here’s a bit more:
The URL insertion mechanism does not work properly. Please delete my first message; I was able to fix the links in the second message my manually inserting them into the HTML code.
Very good. By the way, the link system works fine if you simply Highlight the text in your comment you want to be a hyperlink, hit the little chain symbol button for linking, a window will pop up which should already have the existing “http://” highlighted. Just hit delete, that highlighted portion goes away leaving an empty box that you paste your URL in, hit “OK” and walla you are done. If you are looking at preview and it is telling you it is non-functional, disregard that, it will come out fine in the real comment. Welcome to Emptywheel.
Yes, I did all of that the first time – to no avail. Manually typing the HTML code worked the second time.
And so it goes … If the problem persists, I’ll skip leaving comments.
As you wish, but I have yet to have someone follow the instructions I gave you and not get usable links.
if someone is using No-Script with Firefox (or some such blocking Software), it may be defeating the automated features.
This is what I do. I copy the the link from the web page. Then I come to EW, highlight the word I want to use as the link in my comment and then click the link icon. I go into the the link box that comes up and hit command V and the link address I copied, pastes into the link box.
I do not know if this will work for you.
It’s a javascript onclick. There’s a popup. If that didn’t appear, I’d surmise popups are blocked or javascript is disabled in your browser.
Correction … James Oberstar said that her testimony was “positively lyrical” and poetic.
Sheesh … It’s too damn hot and humid to be on a computer.
(Don’cha love global warming and the “dog days of May”?)
Perhaps more to the point, were not really using any resources we may have to attack this leak! Instead we are letting BP take 34 days (and still counting!) to *hopefully* come up with a solution. We took over GM from bondholders and gave it to the unions in less time then we sit around and watch this oil leak! What is the deal!
What do you think BP has been doing for the last three weeks?
They are, I think, trying everything they know of to stop a gusher – it’s not a ‘leak’ or a ‘spill’ – but a lot of the suggestions I’ve seen from non-industry people are impractical if not totally insane (like nuking it).
I’ve never had any trouble with it.
The way it works here, you highlight the words you want the link to be on, then you click on the little chain above the comment box, and type or paste the URL there, then hit okay.
YMMV, but it’s really easy.
(And if that doesn’t work for you, there’s always typing in the HTML code yourself….)
Some day, some way, some how, please stop wasting time and get to the real problem… Its about economic turmoil and the world governments, including Obama, are a part of it.
After a month of reflection and watching what the Shame in the white house is doing, many of us are making further connections. Its all over the underground news now. Some are even suggesting an intentional detonation. It probably has to do with the proposed unifying of the North and South American countries.
This is a capsule of what is being discussed by people today, and some sources have come forth. Be sure to catch the movie trailer… really creepy.
“”Apparently, a faulty gasket was installed and allowed to fail. The ultimate objective has to do with the movement of the North Atlantic conveyer… In the end, what we have here is a move in the chess game of Weather Wars.
From Wikipedia:
“It is believed that North Atlantic Deep Water formation has been dramatically reduced at times during the past (such as during the Younger Dryas or during Heinrich events), and that this might correlate with a decrease in the strength of the Gulf Stream and the North Atlantic drift, in turn cooling the climate of northwestern Europe…”
Although the exact way this will play out is unclear. However, the gist of it all is that the spill moving up the Northeast coast of the U.S. will head toward Iceland (what is it about Iceland that is such a trigger point/focus for things at this time one wonders) and then over to Europe. Result? Further cooling of the UK and North Europe and destruction of the fisheries industries in those areas, plunging Europe into food shortages and economic turmoil.
What this source said is that this is all part of the very long range plan to roll out the Anglo-Saxon Mission (New World Order). Large contingents are making plans to go off-world and elsewhere in the long run.
This source also cited the movie KNOWING as containing a precursor event very similar to the actual oil rig explosion in the Gulf… this info is all over the net. See this YouTube video clip from the movie: http://www.youtube.com/watch?v=hmgeA3dr2uY“””
The Climate bill is another blood-sucking plan to unite the world order for the banks.
If Axelslob even tries to pull a Katrina on this, using a tragic crisis to further enslave us and control us, may god in heaven save him from the American people.
(this is important info for the american people to check themselves, please do not censor today).
Ah.
Heaven forfend anyone might impugn any rumor of “the proposed unifying of the North and South American countries”…
Americans just have trouble thinking things through, it seems. “Drill baby drill” needs to be followed by “Suck, baby suck,” not “Blow, baby, blow.”
Of course, I would have forgone the drilling part in the first place…but then I’m more of an earthian than an American.
From the NY Times: http://www.nytimes.com/gwire/2010/05/24/24greenwire-website-offers-betting-on-spill-related-extinc-84733.html
The gambling website PaddyPower.com placed odds today on what species would be first to become extinct as a result of crude belching from BP PLC’s ruptured well in the Gulf of Mexico.
Lest we not forget other humongous public rip-offs overseen by Interior on BLM lands: Hard rock mining – where gold worth many billions is pillaged from public lands under 19th century laws. And as Wars for Oil are fought, or the economy tanks – gold just rises in value.
But will the lily-livered Dems make even a feeble change to the laws? Nope. Harry Reid being up for re-election and all. In Nevada, which if it were a country would be the third largest gold mining country on earth – the mining is permanently dropping the water table through aquifer drawdown so spring and stream surface flows dry up. That, and poisoning waters with mercury from ore roasting air pollution that ends up in the region’s streams. BLM can do things – in its RMPs (Land Use Plans) or amendments to them – that make it harder for mines to go in, or for Oil and Gas development to happen. It can designate ACECs (Areas of Critical Environmental Concern) under FLPMA to protect various values. But of course, Interior fights kicking and screaming to NOT designate ACECs of more than postage stamp size these days.
In the New Energy Frontier – giant wind companies seek out Interior BLM land because it is cheaper than placing huge projects on private land. This whole system in Interior is also rigged for Big Industry. Wind developers (increasingly the same old Big Energy names or entities like the Carlyle Group) essentially stake claims on BLM lands. They then get exclusive Rights of Way granted typically under Categorical Exclusions – often before the public even has a chance to comment. And then only minimal NEPA occurs for the next step, the MET towers – where CEs or perhaps EAs are done. Industry gets to put up MET towers – and the info that comes from the towers is Proprietary – meaning no one gets to know just how windy or steady the wind is. All the better to keep investors/speculators coming.
Only then do the Biological and other environmental effects studies for an EIS start – or in Reid’s Nevada a Carlyle Group wind farm in Spring Valley is trying to fly under the radar with an EA to get “fast-track stimulus dollars”. After the 200 ft. tall MET towers are up and they have already driven wildlife like sage grouse away (due to the species aversion to tall objects that likely remind them of predators stooping from above).
Putting these giant wind farms in the wrong place (like a ridge top used by large numbers of migrating birds or a valley near bat caves that are home to millions of bats) is death in the air. Year after year after year … Death in the skies. These giant developments are part of cementing the lockhold of the same old nasty actors on ALL energy – so they can gouge the public. Salazar’s Interior – instead of planning for responsible siting of renewable development on public lands. Obama/Salazar are again allowing the Energy Industry to pretty much do whatever it wants on the “green” front, too.
I’ve come to believe the idea that Obama hates even the word “public”. Noticed in the campaign he rarely uttered it.
Yeah, it’s like “public” is the new “liberal.”
CORPORATE DEATH PENALTY.
This may already have been discussed but, why were all of these drilling permits provided by the MMS after the so called moratorium on drilling?
17 Application to Drill Permits Issued by the Minerals Management Service 5/10/2010 -5/18/2010
Substanti8 at 35–
Check your browser. Has it finished fully loading the page? In Firefox, if it is done, the activity line (just above the Start button) should read “Done”. The link symbol and other comment tools are active only if the page is done loading. If it has not finished loading, the comment tools won’t be available. Same with the “Reply” feature that tags your reply when you click on the “Reply” link– if your browser hasn’t finished loading, clicking “Reply” will take you to the comment box, but it won’t tag your comment with the reference to the comment that you’re replying to. That happened to me with this comment, so I had to manually type the info in.
This happens when you have too many windows open, or have left your computer on for a week without rebooting.
Bob in AZ
I have occasional issues with functionality of comment features discussed by others.
In most cases page is fully loaded- it is an intermittent problem I thought it was just me…. noticed for about 2 or 3 weeks.
Not sure as to why it might be intermittent, as popup blocking and browser settings are not changing (afaik) while the problem comes and goes.