Coyote Blog

One of the issues that is giving Democrats an entre to wack on oil companies is the issue of "subsidies" for deep offshore drilling.  These subsidies appear to take the form (though nothing in the world of oil field royalty payments is very simple or clear) of reduced royalty payments:

With oil prices still above $60 a barrel, do oil companies need
inducements to find and produce more oil? That's the underlying
question of today's NYT front-page article about an Interior Department report questioning the value of royalty rebates and tax breaks for gas and oil production.

The rebates are targeted at expensive and difficult exploration,
usually in deep water or that requires deep drilling. The intention is
to incentivize that exploration, allowing the United States to increase
its domestic reserves using "unconventional oil."

This is the kind of "incentivizing" that always goes wrong for the government, and turns even the best of intentions into massive rent-seeking opportunities.  My solution is similar to Cato's Tom Firey's:  Just make the royalty payment amounts and percentages subject to a bid as part of the offshore leasing process.  The government can include minimum reserve prices and such to protect itself (as they already do for offshore leases).  He suggests rolling all the value into a single up front number.  I would instead suggest a bid upfront number plus a bid royalty that is either a fixed amount per barrel, or more likely, a fixed percentage of oil revenues at some benchmark oil price.

What I am NOT sympathetic to is one party in a lease agreement trying to use its legislative party to void the terms of a previous agreement because it no longer likes the terms:

The article notes that royalties and corporate taxes deliver into
federal coffers about 40 percent of the revenue produced from oil and
gas extracted from federal property. The worldwide average government
take is about 60"“65 percent. A 40 percent federal take may have been
fair at a time when oil prices and profits were lower, the article
suggests, but the government should be getting a much higher cut from
today's prices.

Trying to just void previous deals in order to get better terms is just thuggery, and is the worst possible disincentive for long-term investment.

Please stop tell me that I have no right to question Al Gore when he wants to take over the world economy to his own ends.  And please stop telling me that catastrophic man-made global warming is now beyond question:

One of the many disturbing aspects of global warming hysteria is the
way moonbats who use it to promote their ominous political agenda
insist on a consensus that simply does not exist. A recent survey
of more than 12,000 environmental scientists and practitioners by the
National Registry of Environmental Professionals shows that despite the
hysteria and considerable pressure to conform to the "correct" view,
many scientists are choosing skepticism over the safety of the herd.

The survey found that:

• 34% disagree that global warming is a serious problem;
• 41% disagree that warming trends "can be, in large part, attributed to human activity";
• 71% disagree that human activity has significantly contributed to hurricanes;
• 33% disagree that the US government is not doing enough about global warming;
• 47% disagree that international agreements such as the preposterous
  Kyoto Protocol provide a useful framework for addressing global climate
  change.

There are good reasons to believe in some man-made global warming, but there are very good reasons to doubt it will be as catastrophic as portrayed in the media, and very, very good reasons not to hand over the throttle of the world economy to environmental groups in anticipation of such uncertain events.  My position on the skeptical middle ground on climate change is here.