Consumer Energy Report is now Energy Trends Insider -- Read More »

By Lloyd McGraw on Apr 13, 2010 with no responses

US Re-Evaluates Its Drilling Royalty Rates

The Department of Interior announced yesterday that they intend to commission a worldwide study to ensure that the United States is not undercharging private companies for the rights to drill on Federal property for oil and natural gases.

“This study will provide some common-sense grounds for comparison as we evaluate our royalty rates and our oil and gas fiscal policies in the context of global markets,” said Bob Abbey, director of Interior’s Bureau of Land Management.

“The Administration is committed to ensuring that taxpayers receive a fair return from mineral production on their lands,” Abbey added.

Presently, the United States charges a 12.5% royalty for extracting fuel from Federal land and up to 18.75% for offshore drilling.  If the study finds that other governments are charging a more significant rate, the US may bump its royalty rates closer toward 20%.

“The results of this study will enable the Department to ensure that its leasing policies are providing the public a fair return on federally-owned oil and gas resources, while balancing other objectives, including production and environmental stewardship,” states Interior’s announcement of the study.

Industry executives counter that this is a poor time to consider increasing royalty rates given the the current economic climate.  “The more that royalty rates are increased, the more difficult it is going to be to produce American energy,” said Dan Naatz, vice president for federal resources and political affairs with the Independent Petroleum Association of America, according to The Hill.