WASHINGTON — Oil and gas companies had a rough week in Washington.
The U.S. Interior Department increased the fines it imposes for drilling violations in the Gulf of Mexico. Then President Barack Obama once again called for a cumulative $45 billion in tax breaks to oil companies to be removed.
“It’s another attack on our industry,” said Chris John, president of the Louisiana Mid-Continent Oil and Gas Association, and a former congressman. “It continues to prove that this administration doesn’t understand the value of the oil and gas industry.”
On Wednesday, the Interior Department announced that the maximum civil penalty rate for violations of the Outer Continental Shelf Lands Act will increase from $35,000 to $40,000 per day.
Violations of the Oil Pollution Act will rise from $25,000 to $30,000 per day. Interior officials said the increases coincide with the adjustment of inflation. Obama has asked that Congress pass legislation to further raise the penalty rates over and above inflation.
“Our civil fine authority is inadequate,” said Michael Bromwich, director of the department’s Bureau of Ocean Energy Management Regulation and Enforcement, in a statement.
“The inadequacy of our civil authority hampers our ability to effectively regulate offshore activities and renders such fines as a trivial nuisance rather than an effective deterrent,” Bromwich said.
The agency can impose the penalties when an operator fails to correct a violation or commits an infraction that constitutes a threat of “serious, irreparable or immediate harm or damage to life, property, any mineral deposit or the marine, coastal or human environment.”
U.S. Sen. David Vitter, R-Louisiana, used the violation penalty increase to once again criticize the Obama administration on what he and other delegation members have called the slowness of the department issuing permits.
“I wouldn’t mind some increases if the regulations themselves were reasonable and clear and if permits were issued in a timely way,” Vitter said in a statement. “But Interior isn’t close to achieving those important goals. Maybe Obama and (Interior Secretary Ken) Salazar should be fined for destroying good Louisiana jobs.”
Senators took to the floor earlier in the week to once again criticize the oil and gas industry for tax breaks they said result in billions of dollars not making it into the federal treasury.
U.S. Sen. Bill Nelson, D-Florida, highlighted one break that reduces the tax payments of companies who set up their headquarters in foreign countries. One company, Nelson said, saved $1.9 billion in taxes from 2002 to 2009 by operating offshore.
Transocean, a company implicated in the BP Deepwater Horizon oil rig explosion last year that killed 11 men and resulted in a three-month discharge of oil into the Gulf, has been able to cut its taxes in half by moving its headquarters to a foreign country, Nelson said.
Five other oil companies moved their operations to the Caribbean in order to avoid paying U.S. income tax, Nelson said.
“These corporate tax loopholes for oil companies should be part of any deficit reduction package,” Nelson said. “Oil and gas companies are experts at figuring out the narrow tax break and it benefits their interest and it does so particularly with regard to offshore drillers.”
U.S. Sen. Mary Landrieu, D-Louisiana, is a fervent supporter in Congress for the oil and gas industry. Yet Landrieu said she has a concern about Transocean and other companies moving offshore.
“Everybody should pay their fair share,” Landrieu said.
Landrieu expressed anger, however, over Obama targeting the oil industry as part of any revenue enhancers. Like the rest of the delegation, Landrieu has criticized the administration for its five-month moratorium after the Deepwater Horizon accident and what they call the subsequent “permitorium” of slowly issuing permits.
Landrieu said Obama “has done enough damage” to the industry.
Vitter would support getting rid of the special tax rates if it is used to lower overall tax rates, including the corporate tax rate that he said is the second-highest in the world.