Burlington, Vt. - Peter Welch, candidate for U.S. Congress, today called for Congress to end a major give-away to the oil and gas industry that will cost tax payers an estimated $7 billion in the next five years.

Welch believes Congress should stop offering "royalty relief" to companies drilling oil on public land and that the revenue owed to the federal government should be used for renewable energy development.

Last year, House Republicans pushed for a provision in the energy bill that allows oil companies to avoid paying fees to the federal government for the right to drill for oil in publicly owned coastal waters. This break could amount to a giveaway of more than $7 billion over five years to an industry that is seeing record profits (NYT, 3.27.06).

"Extending a giveaway at taxpayer expense to the oil industry reaping record profits defies common sense," charged Welch. "Rather than end this unnecessary break to the oil industry and generate revenue for energy alternatives, the Bush Congress continues to give more to a special interest that has plenty."

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Congress offered royalty relief in 1995 when energy prices were low and oil was $16 a barrel. The legislation waived the standard fees associated with drilling on federal land as an incentive to explore for oil off the Gulf Coast. It was stipulated that if prices exceeded a threshold of about $34 per barrel, companies would resume paying the tax on royalties.

However, the Bush Administration and the Republican Congress have turned an incentive program at a time of low energy prices into a corporate entitlement program for big oil at a time of record profit.

In 2001, Vice President Dick Cheney's energy task force recommended opening more federal land and water for oil exploration and urged the government to "explore opportunities for royalty reductions." Interior Secretary Gale Norton began offering royalty incentives to increase oil drilling. In 2004, Secretary Norton raised the royalty relief price threshold, allowing producers to escape payments in 2005 (NYT, 3.27.05).

Then, in 2005, House Republicans muscled through permanent royalty relief, even as oil prices stood far above the threshold contained in the original legislation (NYT, 3.27.05).

The New York Times reports that, "energy companies, whose executives had long contributed campaign funds to Republican candidates, pushed to block any amendments aimed at diluting the benefits" (3.27.05).

"It is absolutely wrong for Congress and the Bush Administration to give this industry another unneeded hand-out at a time when Vermonters face budget-crippling gas prices and oil companies are fetching record high profits," added Welch.

"We cannot drill our way to clean and affordable energy. The common sense solution is to end this hand-out and direct the funds to developing energy alternatives that can provide cheaper and cleaner alternatives to consumers," he continued.

Welch supports legislation that would reestablish the royalty escape clause and also instruct the Interior Secretary to renegotiate existing contracts. The standard royalty payment of 12 percent on up to 87.5 million barrels should apply, he argues.

Oil prices this week rose to a new record high above $71 per barrel (AP, 4.19.06). Even Shell Oil,s Michael Coney admits that, "under the current environment, we don,t need royalty relief," (NYT, 3.28.06).

In a rare moment of fiscal responsibility in April, President Bush said, "With oil at $50 a barrel, I don,t think energy companies need taxpayer-funded incentives to explore" (NYT, 3.28.06).

"It is common sense that we end this multi-billion dollar giveaway to the oil industry and dedicate the revenue for efficiency and alternative energy grant programs. We must begin to reduce our dependence on oil, promote the future, not that past," said Welch.

Welch proposes using the savings to provide resources for increasing federal grants for local renewable energy projects (such as "cow-power" and biomass), tax incentives for energy efficient appliances and vehicles, and conservation programs.

These programs are currently shortchanged by the Republican leadership in Washington. President Bush,s FY07 budget cuts conservation programs (by $113 million) and renewable energy loans (from $117 million to $35 million) and grants (NYT, 2.6.06).