Blog on the Run: Reloaded

Tuesday, May 25, 2010 12:09 pm

Cost-benefit analysis

Filed under: I want my money back. — Lex @ 12:09 pm
Tags: , , ,

One argument — and you can debate its merit relative to other arguments — in favor of allowing offshore oil drilling is that the oil companies pay a royalty to the American taxpayer for every barrel of oil they bring up.

But is it enough to make the enterprise worthwhile for us? Do we even break even?

Marcy Wheeler wondered. And she followed Rule 5 of investigative reporting, which is: do the math:

Last year, the Minerals Revenue Management department of the Mineral Management Service reported $9.9 billion in royalties from all mineral exploitation. Of that, MRM collected $5.8 billion for all federal offshore drilling of oil and gas.

$5.8 billion for exposing an ecosystem like the Gulf to the risk of the catastrophe that is now playing out. BP will pay more in liability or cleanup than that.

Of the $5.8 billion MMS brought in from offshore oil and gas drilling, $3.1 billion appears to come from oil, which is our share of the $23.5 billion in revenues for 425,199,067 BBL of oil drilled off shore.

Do the math. If I’m doing my math correctly, that means we’re getting less than $7.60/BBL for royalties the oil. That’s not all the money we get, mind you. There’s the actual bonus bid for the drilling rights and rent up until oil starts flowing; BP paid $34 million to the rights to this particular site. And starting in 2008, royalty percentages for Gulf leases were raised to 18.75%, but a lot of those leases aren’t producing yet. But using the $7.60 we’ve been getting for oil, taking the highest estimates for the rate of spill–70,000 BBL/day–and assuming it will spill for a total of 90 days, taxpayers would get less than $48 million in oil revenues for all that oil, enough to ruin the Gulf ecosystem for a generation, not to mention the serious damage to the fishing and tourist industries. While not all of the fishing and tourist industries will be destroyed, in 2008 all Gulf states brought in over $1 billion in fish, shrimp, and oysters, and $20 billion in tourism.

I realize weighing the oil gushing into the Gulf this way doesn’t account for the jobs the oil industry supports in the Gulf, but it is a testament to how cheaply we’ve exposed ourselves to the enormous environmental risk of oil drilling.

She also points out that the Government Accountability Office has warned Congress in recent years that taxpayers are getting nowhere near the amount of money they’re due in oil and gas royalties, and that of 104 fiscal systems that it studied, the GAO ranked deepwater Gulf drilling 93rd in efficiency in getting taxpayers the money they were due.

But how much of a price tag can you put on the ruin of a huge ecosystem, with its associates seafood and tourism industries, for a generation? And that’s assuming the eruption is actually stopped within the next few weeks — an assumption for which, at this point, we have BP’s word and little else.


Thursday, May 7, 2009 8:48 pm

In other words, it’s running just the way it’s supposed to … if you’re a wealthy financier

Filed under: I want my money back. — Lex @ 8:48 pm
Tags: ,

Shorter Government Accountability Office: The Securities & Exchange Commission doesn’t have enough lawyers, paralegals, support staff, money, copiers, computers, or much of anything else; it’s difficult to catch guilty parties, even more difficult to punish them and more difficult yet to actually collect the fines once they’re punished; the commissioners themselves don’t give much of a damn; and there’s nothing in place to prevent another disastrous bubble from happening.

(OK, that’s not all that short. But the actual report is 60-some scary and depressing pages.)

Tuesday, August 12, 2008 9:58 pm

Simple answers to simple questions: Social Security

How do we ease Social Security’s problems? Cracking down on employers who don’t pay Social Security and Medicare taxes to the government would help.

This has been another edition of Simple Answers to Simple Questions.

(h/t: Mom)

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