by Bill KovacsAs the federal government works feverishly to address our economic crisis the question being repeatedly asked is – where are we going to find the money to pay for cleaning up this mess. Fortunately, there is an answer! It is in the piggybank that the nation has locked up for almost three decades and as luck would have it contains, at least, $1.56 trillion inside.
The piggybank is called the Outer Continental Shelf (OCS) and it contains 85 billion barrels of oil and for each barrel of oil that is produced the United States government receives a royalty payment. Since the OCS has been off limits for three decades the royalty payment amount has not yet been established, so let's look at Alaskan oil where the industry pays a royalty of $18.36 a barrel. Assuming the royalty will be similar, it is a simply calculation of $18.36 per barrel times 85 billion barrels.
These numbers are conservative since the U.S. has not physically inventoried the area in decades and with new equipment and drilling techniques it is very likely to have much more than 85 billion barrels. This has certainly been the case in other areas such as Alaska . So we could be talking about trillions of dollars in royalty payments to the citizens of the U.S. On top of the royalties there would be corporate taxes in the hundreds of billions of dollars and income taxes on the thousands of jobs that would be created.
Congress in the last few weeks let the prohibitions on drilling in the OCS expire, however, many members of Congress want to re-impose these prohibitions in the next Congress. Nothing could be more foolhardy; especially at a time when the revenue payments are needed. At some point in time this nation needs to pay for what it spends.
In addition to royalty payments there is another huge benefit. The 85 billion barrels in the OCS would also offset purchases of foreign oil. Even if oil dropped to $50 a barrel the U.S. would reduce its purchases of foreign oil by $4.25 Trillion Dollars over the life of the OCS.
These calculations do not even include the royalty payments on the 420 trillion cubic feet of natural gas in the OCS; these payments would also be huge and are needed.
While for decades many in the business community pushed to open up the OCS and were frustrated by the fact that Congress locked up these reserves; however like many thing in life it has worked out for the best. We now have a piggybank with huge savings when we need it most and the time to use it is now!
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