...passed in 2005.

The 2007-2008 Congress is quite different in composition, but the vast array of oil industry subsidies remains untouched.

When Representative Nancy Pelosi, D-California, took over as Speaker of the House, she promised that in the first 100 hours of the new Congress, representatives would repeal subsidies to Big Oil.

The Democratic House of Representatives delivered on this promise in part, closing loopholes that let oil companies underpay royalties from drilling on federal land, and allocating the earnings to support for alternative energy.

But the measure was not able to win sufficient support in the Senate, and the energy bill passed by Congress at the end of 2007 left Big Oil's package of subsidies in place.

The loophole that allowed the industry to underpay royalties was actually an unintended omission: a failure to require royalties be paid if the price of oil exceeded a set value [see "Greasing the Deal: A Royal(ty) Seam," Multinational Monitor, September/October 2006]. The industry says it would be unfair to fix this mistake, because a contract is a contract.

"You have arguments that this goes against the core principles of contract law," says Erik Milito, senior counsel and spokesperson for the American Petroleum Institute. "The only way you can change a contract that's already in existence is by the parties voluntarily agreeing to it. That's really been where the resistance is coming from."

"When you enter into a contract for one of these leases, the government hands you the contract, there's no negotiation," says Milito. "You win the bid, you get the lease, you either sign it or you don't get it. So what they were signing was the deal. And that deal, when they signed it and got it, included no price thresholds in it."

Perhaps the industry has successfully been able to keep an unintended, multibillion-dollar mistake in place because of its policy arguments.

Another theory is that it is getting a return on its political investments.

The oil and gas industry spent more on the 2004 election than ever before--$16.7 million in Congressional campaign contributions, 80 percent of which went to Republicans. They topped that figure in 2006, pouring $20 million into that year's Congressional elections. This has been money well spent. With the value of ongoing and new subsidies to the oil and gas industry conservatively estimated at more than $6 billion a year, the industry is earning a return on investment of more than 650-to-1.

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Like other major industries, Big Oil spends far more on lobbying than campaign contributions--about $139 million total in 2005 and 2006. But...

NOTE: All illustrations and photos have been removed from this article.



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