Stung by criticism that it has failed to collect all the royalties the U.S. is owed, the Bush administration has announced that it is raising royalties on oil and natural gas extracted from the Gulf of Mexico, the area from which about a quarter of U.S. oil is produced. The new royalty will raise the payment on new leases from the equivalent of one barrel out of every eight to one out of six. This should boost federal royalty revenues by $4.5 billion over 20 years. The new royalty will not, however, affect any of the myriad existing offshore leases; nor will it undo a mistake in hundreds of leases that could allow companies to avoid up to $10 billion in royalties over the next five years. Two of the biggest operators in the Gulf, Chevron and Exxon Mobil, have vigorously fended off efforts by the Interior Department to renegotiate their deals. In related news, the U.S. is removing drilling bans from two large tracts, one in the Gulf of Mexico and another in Alaska, in order to boost domestic energy production.
• Sources: New York Times, Forbes, Wall Street Journal
• Related commentary: Rig Shortages Delay Gulf Exploration and Production as Costs Jump, Exxon Shares Sinking to Levels They Richly Deserve, Exxon - The Most Evil (and Overpriced) of the Oil Companies, Eye on Chevron, BP's Output Falls Again; A 'Brave' Buy with Upside Potential as a 'Recovery Stock', Fuel For Thought: Which Integrated Oil Company Should You Own?
• Potentially impacted stocks and ETFs: BP plc (NYSE:BP), Royal Dutch Shell plc (NYSE:RDS.A), Chevron Corp. (NYSE:CVX), Exxon Mobil Corp. (NYSE:XOM), Statoil ASA ADS (NYSE:STO). ETFs: BLDRS Europe 100 ADR Index (NASDAQ:ADRU), BLDRS Europe 100 ADR Index (ADRU)
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