Congressional fight fumes over oil royalties

Oil-state senators confident they can break logjam, block Interior Department proposal to revamp way government collects royalties

H. Josef Hebert

Associated Press Writer

Oil-state senators expressed confidence that they will be able to break a logjam and block an Interior Department proposal that would revamp the way the government collects royalties from oil companies pumping on federal land.

The proposed changes, designed to end what critics say has been a longtime practice by oil companies to shortchange the government in royalty payments, has been in limbo for two years. A proposed amendment to Interior's spending bill would bar action for another year.

But Sen. Barbara Boxer, a California Democrat, has refused since Sept. 9 to allow a vote on the amendment, and an attempt to overcome her delaying tactic fell short, 55-40, Sept. 13. Sixty votes were needed to end debate.

Republican Sen. Kay Bailey Hutchison of Texas, the leading critic of the Interior proposal to revamp the way oil royalties are collected, said she would not withdraw her amendment, setting the stage for another confrontation later in the week.

Boxer accused major oil companies of engaging "in a scheme to essentially rob the Treasury of millions upon millions of dollars" by undervaluing oil pumped from federal land and offshore fields.

The Interior Department wants to peg the royalties to market indicators, arguing that oil companies have been valuing oil at artificially low prices at the wellhead.

Delaying the royalty reforms another year "will result in losses to the federal treasury, states and Indians of $5.56 million per month," Interior Secretary Bruce Babbitt wrote senators last week.

But oil industry supporters argue the Interior Department's proposal, which has been ready since mid-1998, would be difficult to manage and likely overstate the value of the oil. It amounts to a new tax on an industry that already is facing hard economic times, argues Hutchison.

"While the large oil companies might be able to absorb these costs, hundreds of small independent producers probably will not," she said.