House Democrats call for higher federal onshore royalty rates

Rep. Alan Lowenthal (D-Calif.) urged the US Department of the Interior to raise the 12.5% royalty rate oil and gas producers pay for production from onshore federal lands.

“Appropriate rental and royalty rates for onshore oil and gas leases help ensure that states, the US Treasury, and all American taxpayers receive their fair share from the nation’s oil and gas boom,” he said in an Aug. 7 letter to Janice Schneider, assistant Interior secretary for land and minerals management, which 42 other House Democrats signed.

The current federal royalty rate, which has not been changed in nearly a century, is not close to what others charge, said Lowenthal, a House Natural Resources Committee member, as he released the letter.

“Not only is this less than our western states charge, and what is charged for offshore oil and gas royalties, but it is one of the lowest rates of any country in the world,” he maintained. “These lands belong to the public, and this current royalty rate system is neither fair nor equitable for the American taxpayer.”

He said a Dec. 6, 2013, Government Accountability Office report recommended that the US Interior secretary take steps to let the US Bureau of Land Management adjust its onshore royalty rates to a level closer to the 18.75% collected on production from some federal offshore leases.

Rental rates, which producers pay to reserve the right to use certain federal tracts, have not been raised since the 1980s, and also are exceedingly low, Lowenthal said.

He noted that the Denver-based Center for Western Priorities, which tries to promote responsible conservation and energy practices across the West, said in a new report that some producers pay less than $1.50/acre annually in federal onshore rentals. Updating onshore rental rates could generate another $56 million/year for taxpayers, CWP’s report said.

Contact Nick Snow at nicks@pennwell.com.

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