Baseball Crank
Covering the Front and Back Pages of the Newspaper
January 19, 2007
POLITICS: And So It Begins

Not for the last time, I am sure, House Democrats vote to raise taxes. Naturally they start with a politically unpopular target: domestic oil companies. The new taxes and fees, of course, raise the costs to domestic producers, thus benefitting their foreign competitors. Nice work. Hopefully, someone is keeping close track of how many times each of the newly elected Democrats ends up voting for a tax hike of one sort or other.

This aspect of the bill could be interesting:

The legislation "amounts to a taking of private property" by forcing oil companies to renegotiate leases they view as valid contracts, [Rep. Don Young, an Alaska Republican] said.

The bill would bar companies from future lease sales unless they agree to renegotiate flawed leases issued in 1998-99 for deep-water drilling in the Gulf of Mexico.

Because of a government error, the current leases do not contain a trigger for royalties if prices soared, as they have in recent years. As a result, the companies have avoided paying $1 billion in royalties so far and stand to avoid an additional $9 billion over the life of the leases, the Interior Department says.

The caselaw is narrowly divided over the circumstances under which government can change the terms of business with its contractors without incurring liability, but if all that's being done is to refuse future business as an incentive to renegotiate, I would think that doesn't amount to a taking of vested contract rights. But the devil will be in the details.

Posted by Baseball Crank at 7:19 AM | Law 2006-08 • | Politics 2007 | Comments (5) | TrackBack (0)
Comments

Crank, it will not effect competitiveness regarding domestic v foreign producers. However, the entire cost will be passed thru at the pump. They raised taxes on us, even jim.

Posted by: abe at January 19, 2007 8:50 AM

Still no real energy policy. The last decent politician was probably Eddie Murphy in The Distinguished Gentleman (love the duck hunting scene). I am in favor of a large energy tax, provided (hah!) that the money goes to incentives (and NOT taking the money and moving it) for various alternative means created. And that also means transferring the credits, so if GE is producing wind or nuclear, then they can sell the tax credit around to a company that needs it, like say Exxon Mobil.

I have a large trust in the greed of homo sapiens. If it's in our best interest to actually gain by producing alternative fuel sources, well, we really will do it. The only incentive that produces results faster than capitalism is war. And we are indeed at war.

Posted by: Daryl Rosenblatt at January 19, 2007 1:19 PM

I find it appropriate that HR 6 was passed on the same day that oil prices dipped below $50 per barrel. The Market continues to be the best way to deal with pricing issues. Certain domestic and alternative fuel sources only make sense economically when prices hit a certain level. Just look at the cost for a bushel of corn in the last year. It more than doubled.

I am all for alternative energy. This bill's purpose; however, is for nothing more than press coverage and politics. Being able to say you voted for HR 6 is just a bullet item for all of these newly elected Reps campaign pieces a year from now.

For as much as the Dems complain about how the Republicans govern, they have merely stolen the '94 playbook and changed the names of the plays.

Posted by: Phanatic at January 19, 2007 1:35 PM

My major disappointment with all propoasl bandied about these days is they do NOTHING to address the near future. A large tax would be political disaster, but it would affect demand. How big would it have to be to affect demand? 70$ did not do the trick. Not gonna happen. As a result any plan that does not substantial expend domestic drilling is a waste of everyone's time. It's not serious proposal. That's why the last SOTU sickened me. If Bush and Cheney don't know, or have the balls, whatever. There's just no excuse.

Posted by: abe at January 19, 2007 3:22 PM

Unfortunately, abe, we have Democratic Senators that think of ANWR as some kind of recreation of the Garden of Eden instead of the frozen-over abandoned Wal-Mart parking lot that it actually resembles. They filibustered ANWR drilling every time it came up for the last 6 years, and when it did actually pass Congress earlier, in the 1990s, Bill Clinton vetoed it. Bush didn't bring it up because if it couldn't get through Congress with the Republicans in the majority, it would be DOA with the current Congress. But in general, I agree: we won't start cutting back on foreign oil until we drill for what we already have, and it's entirely the fault of Congressional Democrats that we aren't.

Posted by: Finrod at January 26, 2007 1:09 PM
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