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Subsidies are primarily in the form of royalty relief for off shore drilling (and some drilling on federal lands).
Until the 1990s, oil companies payed a royalty fee to drill in these areas and the fees generated at least $100 billion in revenue to the goverment over the years.
In the 90s, a policy was adopted to waive the royalty fees as an incentive to enourage drillng when the price of a barrel of oil was around $20. The waiver was tied to the price of oil so that if it rose signicantly, the waiver would no longer be available.
In the 2005 Energy Bill, the waiver of the royalty fees was extended but no longer tied to the price of oil, so that energy companies are still getting the waiver. It was never the intent to continue to waiver when a barrel of oil was at the current high price.
Yes, it is a subsidy.
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05-12-2011, 08:11 AM
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