Big Oil Avoids Paying Billions in Royalties to the US Government

by Project Censored
Published: Updated:

Through a loophole from 1995, Chevron has avoided paying $1.49 billion in royalties to the US government for drilling on US deep water leases in the Gulf of Mexico.  ConocoPhillips, Royal Dutch Shell, Exxon Mobil, and BP have profited, though to a lesser extent, from the same loophole.  In total, the loophole has generated a windfall of $2.62 billion for Big Oil at the expense of government revenues.  Taxpayers will foot the bill while Big Oil laughs all the way to the bank.

Congress intended its Deep Water Relief Act of 1995 to provide incentives for oil drilling in marginal areas when oil prices were low.  However, leases granted in 1998 and 1999 failed to include price thresholds that would require royalty payments once gas and oil prices increased.

In 2006, President George W. Bush asked oil companies to renegotiate their leases voluntarily, but they did not.  Now, Rep. Edward Markey (Dem-MA) is sponsoring legislation that would force the Big Five to renegotiate those leases. Rep. Markey is quoted as saying, “Congress is now debating ways to avoid deep, across-the- board cuts to defense and domestic priorities such as education, transportation, law enforcement and environmental protection. Ending royalty-free drilling (and other giveaways to oil and gas companies) should represent low- hanging fruit in the search for budget savings.”


Jim Efstathiou Jr., “Chevron Reaped $1.49 Billion After U.S. Botched Leases,”, February 26, 2013.

Student Researcher: Alyssa Phillips, College of Marin

Faculty Evaluator: Andy Lee Roth, College of Marin