The Addiction

Like a fresh needle distribution program...

The federal government is on the verge of one of the biggest giveaways of oil and gas in American history, worth an estimated $7 billion over five years.

New projections, buried in the Interior Department's just-published budget plan, anticipate that the government will let companies pump about $65 billion worth of oil and natural gas from federal territory over the next five years without paying any royalties to the government.

Based on the administration figures, the government will give up more than $7 billion in payments between now and 2011. The companies are expected to get the largess, known as royalty relief, even though the administration assumes that oil prices will remain above $50 a barrel throughout that period...

Moreover, the projected largess could be just the start. Last week, Kerr-McGee Exploration and Development, a major industry player, began a brash but utterly serious court challenge that could, if it succeeds, cost the government another $28 billion in royalties over the next five years.

In what administration officials and industry executives alike view as a major test case, Kerr-McGee told the Interior Department last week that it planned to challenge one of the government's biggest limitations on royalty relief if it could not work out an acceptable deal in its favor. If Kerr-McGee is successful, administration projections indicate that about 80 percent of all oil and gas from federal waters in the Gulf of Mexico would be royalty-free.

"It's one of the greatest train robberies in the history of the world," said Representative George Miller, a California Democrat who has fought royalty concessions on oil and gas for more than a decade. "It's the gift that keeps on giving."