House Democrats will also introduce a bill this week to end the royalty break. "The American people are getting stood up and hung out to dry by an Administration that favors sweetheart deals with Big Oil over the needs of working Americans," said Democratic Rep. Ed Markey of Massachusetts. The Interior Department defended the policy, saying the government had signed contracts agreeing to charge no royalties for drilling on certain deepwater properties through 2011. In 1998 and 1999, when oil and gas prices hit historically low levels, the government decided to forgo collecting royalties on a portion of production from ultradeep Gulf waters, where expensive exploration and drilling costs would have cut into company profits. Subsequent drilling leases suspended the royalty relief when oil and gas prices reached certain high levels. Companies generally pay royalties based on 12.5 percent to 16.67 percent of the value of the oil and gas they drill. The Interior Department said the volume of oil and gas from the 1998 and 1999 leases will rise, earning the companies bigger profits thanks to the waived royalties. The department estimated that through the 2006-2011 budget years energy companies will not pay royalties on some 298 million barrels of oil worth $15.4 billion and 7.1 trillion cubic feet of gas worth $50.4 billion. At a time of high prices for home heating oil, natural gas and gasoline, royalty relief has caused an uproar. "With back-breaking federal budget deficits, oil prices topping $60 a barrel, and record-breaking profits for these companies, this is no time for massive giveaways to the oil industry or further fattening their bottom lines," said Democratic Sen. Maria Cantwell of Washington. Kevin Curtis, vice president for the National Environmental Trust, said the royalty revenue the government will be losing could "be better spent investing in renewable energy and energy efficiency programs to help consumers at the pump." Johnnie Burton, director of the Interior Department's Minerals Management Service that oversees offshore drilling activities, said companies are entitled to the break in royalties, no matter how high prices or profits go. "I think that when the government signs a contract and agrees to certain terms, it is bound by its word to keep those terms, even though sometimes it's a little tough like right now," Burton said in a telephone call to reporters. "We made a deal, and a deal should be a deal." She refused to speculate on how much the government would lose in royalties, but agreed it would be in the "multibillions" of dollars. Burton said royalty relief has increased U.S. oil and natural gas production, and allowed Americans to avoid the high gasoline and other energy prices that Europeans have to pay. "We have had it very good in this country for long time. Now, we want to keep it that way," she said. "We have to have the production that meets the demand." John Felmy, chief economist for the American Petroleum Institute, said the policy has helped stimulate domestic oil and gas production. "The costs of exploring and producing in the Gulf in deepwater are enormous. and so this royalty relief took some of the risks away," he said. "To now go back and change the rules of the game is fundamentally unfair." Felmy and Burton said they did not now if the companies could still make a profit off their deepwater drilling if the Congress offset the royalty relief with new taxes on their profits, which is what some lawmakers are calling for. PIN/REUTERS