Big Oil Gets To Keep Its Loot

Laura MacCleery

January 25, 2007

Laura MacCleery is the director of Public Citizen’s Congress Watch division.

When the U.S. House of Representatives voted to eliminate $14 billion in tax breaks and subsidies for the oil and gas industry on January 18, it left at least one item off its target list: a billion-dollar handout to a research consortium that includes publicly traded companies that reaped $100 billion in profits in 2005.

Without congressional action, the money will soon begin flowing to the Research Partnership to Secure Energy for America, a 501(c)(3) formed in 2002 by the Gas Technology Institute, a natural gas research organization that was facing the loss of a federally-mandated source of income that once topped $200 million annually.

Championed by disgraced former House Majority Leader Tom DeLay, R-Texas, the oil and gas subsidy was slipped late one night into the massive Energy Policy Act of 2005 after a House-Senate conference committee had completed its deliberations on the bill. The conferees thus had no chance to consider the provision before it reached the House and Senate floor. Though this is not the first time we have seen a corporate giveaway stealthily inserted into a bill in the early hours of the morning, it is a striking example of how taxpayers get bilked by corporations and Congress.

The provision called for a 10-year research program for up to $1.5 billion, of which a shocking $500 million was guaranteed without further congressional action. The study seeks ways to allow big oil and gas companies to extract natural gas from ultra-deepwater depths of more than 15,000 feet and hard-to-access on-shore locations. The provision allotted three-quarters of the money to go to a research consortium while the remainder was to go to the National Energy Technology Laboratory, a division of the Department of Energy.

Although it called for “an open, competitive process,” to select a consortium, the law was written – with the help of the Gas Technology Institute’s chief lobbyist, a former DOE official – in a way that gave RPSEA a huge advantage and practically assured that it would not have competitors for the money. In the end, RPSEA was the only applicant and, predictably, was chosen to handle disbursement of the money, overseen by DOE.

RPSEA has more than 90 members, including research universities, national laboratories and privately owned energy firms. Its membership also includes 17 publicly traded energy giants like Halliburton, BP, Chevron and ConocoPhillips, which combined had record profits in 2005 in excess of $100 billion.

The Republican chairmen and senior Democrats on the House and Senate energy policy committees were blamed for the late-night shenanigans. Incidentally, these committee members and DeLay had received significant campaign cash from companies that were then, or would become, RPSEA members.

On Jan. 17, Public Citizen called on Congress to repeal the part of the Energy Policy Act of 2005 that set up the research program. Public Citizen pointed out that RPSEA members could well afford to foot the bill by setting aside a tiny percentage of their overall profits. Even President Bush, a well-known friend of the oil and gas industry, said in the spring of 2005, before the bill was passed, that "With oil at more than $50 a barrel, by the way, energy companies do not need taxpayers'-funded incentives to explore for oil and gas." In April 2006 the Bush administration asked Congress to kill the RPSEA provision, but in December signed a $375 million dollar contract with the consortium.

So far, Congress has failed to do so.

Unfortunately, under current rules, this kind of big corporate payoff can happen again and again. While we certainly applaud the historic lobbying and ethics reforms passed Thursday night in the Senate, even that bill did not fully address this kind of last-minute, backroom deal that lacks any real consideration of public priorities.

In addition to repeal of the research consortium provision of the 2005 energy act, Congress should make it more difficult for corporate interests to win expensive and unnecessary earmarks. So while we disagree with the President's request for a line item veto, we did agree with his call for earmark reform in this year's State of the Union address. The House rules bill and the Senate lobbying and ethics bill passed in January taken together are a good beginning. Speaker Pelosi has said that the House of Representatives will take up their companion to the Senate lobbying reform legislation soon.

Public Citizen recommends the following reforms be included in the anticipated House-lobbying bill and in the final ethics and lobbying bill expected from a conference committee in the coming weeks:

  • There should be full public funding of congressional elections—something that would cost $1.3 billion for a two-year election cycle, less than the cost of this research program—to eliminate the nexus between cash and legislation.
  • The restoration of regular order in Congress so that legislation cannot be slipped into bills at the eleventh hour without full and open debate.
  • The rules committees should define “earmarks”—under the new disclosure requirements—to include items that are a sham competition, tailored so narrowly that only one or a small group of applicants could possibly qualify.
  • A strengthened restriction on government officials, including members of Congress and their staffs, passing through the revolving door to K Street.
  • Extensive earmark disclosure and removal rules.

You can read the whole story of the RPSEA rip-off, detailed in Public Citizen’s report.