Sweetheart Oil Deals


To the extent that the second debate between US president Barack Obama and aspirant Mitt Romney is generating media punditry buzz, that buzz centers mostly around the attack on the US consulate in Benghazi, Libya on September 11: What did Obama know, when did he know it, and so forth.

That’s all very interesting, I guess, but for me the key moment in the debate came early when the two candidates engaged on the subject of energy prices.

Obama pointed out that domestic US oil production has increased during his tenure in office, and that that increase has substantially been a private sector phenomenon.

In response, Mitt Romney — Mister “47% of the people … are dependent on government … feel they are entitled …” — whined that the Obama administration has been insufficiently charitable with “public” land (and taxpayer money) toward the oil companies.

It’s important to understand how such sweetheart “public” land use deals work. This is a subject I started following back in the 1980s when I read an article about leases of national forest land to timber companies. At that time, for every dollar a timber company paid in leasing fees, the US government spent $1.27 on road-building and other projects to enable the exploitation of those timber leases. Or, to put it a different way, the net budget impact was a 27% welfare check to the timber company from Uncle Sugar — prior to and excluding any profits the company might make on the timber itself!

My brief dips into subjects such as the proposed Alaska National Wildlife Refuge drilling kerfuffle indicate that nothing has changed over the intervening decades. So far as I know, the next time a natural resources extraction company offers to cover the entire cost of its own operations on “public” land, let alone deliver a net profit to the US government on the deal, will be the first time.

So now you know why these companies prefer operating on “public” versus “private” property: Taxpayer subsidies make it more profitable. And you know that Mitt Romney’s promise of lower gas prices by opening up more “public” land to drilling is a sleight of hand. He wants to hide some of the cost of gas in your 1040 or on the federal debt ledger instead of letting it be displayed honestly at the pump, so that you pay more while imagining that you pay less.

My point, mind you, is not that Obama is any better than Romney when it comes to corporate welfare. Can you say “individual mandate?” The Affordable Care Act alone is the biggest welfare check to the health insurance industry since Nixon’s HMO Act.

Both candidates are beholden to sets of corporate and special interest benefactors — the bulk of the political class — who expect beaucoup return on their investments. The mission of the state, after all, is to redistribute wealth from the pockets of the productive to the bank accounts of the politically connected. The current presidential contest is just another quadrennial re-appraisal and re-division of the spoils. And it doesn’t really matter that much who wins. They’ll all end up making out like the bandits they are, and you’ll be bled just a little more dry to cover the ever-increasing costs.

For those who oppose “welfare” — be it food stamps which allegedly benefit the poor while actually fueling subsidies to Big Agriculture, or oil leases which allegedly lower gas prices while piping your money to Big Oil via the back door — the only answer is to dispense with political government itself. “Welfare” for the already rich is its raison d’etre.

Thomas L. Knapp is Senior News Analyst at the Center for a Stateless Society.

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