Friday, December 29, 2006

Higher royalties paying for funding boosts for renewables

If the saber rattling by U.S. House Speaker-elect Nancy Pelosi is any gauge, the debate over what constitutes fair royalties to the federal government for oil production could sap the cooperation needed for Congress to accomplish anything that can help focus investor interest in funding renewable and alternative energy technologies. Or maybe money garnered from higher royalities could pay for new programs aimed at promoting renewables, etc.

While House Democrats are talking of establishing a fund dedicated to promote renewable energy and conservation using money from oil companies, they haven't spelled out where that money will come from. Maybe royalties based on the now controversial leases let during 1998 and 1999 are the answer.

Pelosi recently told reporters, "What we'll do is roll back the subsidies to Big Oil and use the resources to invest in a reserve for reseach in alternative energy."

Do subsidies = royalties? It's not clear to what extent, if any, that they do. Either way, the stakes are high. Congressional estimates put the potential royalty loss as as much as $10 billion over the life of the 1998-99 leases. Five companies recently agreed to a compromise to pay royalties on future production but not from oil and gas already taken from federal waters involved.

President Bush has said the industry doesn't need many of the subsidies it enjoys given today's oil prices and industry profits. by economist Steve Stoft could become a useful resource in sorting out the hype which is sure to come from both sides of this debate.


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