The US Department of the Interior has proposed regulations for valuing crude oil produced on American Indian leases. The rules would offer greater simplicity, certainty, and clarity in Indian oil valuation and could boost Indian Country royalties by $20 million/year, DOI said on June 18.
"Ensuring that tribal communities receive their fair share of oil and gas revenues for energy produced on their own lands is consistent with our trust responsibility to tribes," said Interior Sec. Sally Jewell, who also chairs the White House Council on Native American Affairs.
"These updated regulations we're announcing today will not only help protect and fairly value Indian energy assets, but encourage exploration and development and ensure consistency with current federal oil and gas valuation rules," she said.
DOI said its Office of Natural Resource Revenue, in formulating the proposed Indian oil valuation regulations, consulted extensively with tribal representatives and Indian mineral landowners to solicit additional feedback from affected American Indian communities and to meet the secretary's Indian trust requirements.
The existing valuation rule has been in place since 1988, and many oil market changes have taken place since then, ONRR said. A negotiated rulemaking committee began work in 2011 with representatives from tribes, individual Indian owner mineral associations, the oil and gas industry, ONRR, and the US Bureau of Indian Affairs.
The committee met nine times through 2012 and 2013 before agreeing to propose basing royalties on the higher of gross proceeds or an index-based formula that captures a unique provision of Indian lease terms referred to as a "major portion price." Major portion refers to the highest price paid for the oil produced from a field or area, ONRR explained.
WEA's role in process
The Western Energy Alliance was represented on the committee by Kathleen Sgamma, its vice-president of government and public affairs, and by Robert S. Thompson III, shareholder in the Denver office of international law firm Greenberg Traurig LLP.
"The proposed rule demonstrates that when industry, the federal government, and key stakeholders work together, sensible rules can be implemented," Sgamma said. "The negotiated rulemaking committee worked for more than a year to develop a consensus on valuing Indian oil appropriately so that tribes and allottees receive a fair share of royalties while not discouraging development on Indian lands."
She said WEA would comment on the proposed regulations to ensure details correspond to the concepts that were developed. "But we have full confidence in [ONRR Deputy Director] Deborah Gibbs Tschudy, who made this possible after others had failed for over a decade," Sgamma said.
Comments on the proposal will be accepted through Aug. 18.
