The US Bureau of Land Management announced Jan. 2 that it will collect a $4,000 processing fee for each new oil and gas drilling permit application. Rocky Mountain producers warn of a dangerous precedent.
December’s omnibus spending bill made the fee part of the Department of the Interior’s fiscal 2008 budget. “The House was insisting on it. The Senate was against it. What made the difference was that the White House came out in favor of it,” said Bob Gallagher, director of the New Mexico Oil & Gas Association in Santa Fe.
He asked BLM’s public affairs office how language in the 2005 Energy Policy Act prohibiting BLM from recovering such costs affect the fee. Spokesman Tom Gorey responded that the omnibus spending bill specifies it is a processing, not a cost-recovery, fee.
“The money generated by these fees is not new revenue but rather a reimbursement to the US Treasury for the estimated cost of processing new APDs [applications for permits to drill] for the duration of fiscal year 2008,” BLM said in a press release.
Bigger question
“They used the word ‘reimbursement’ in their press release, but it looks a lot like recovery,” Gallagher told me. “We don’t believe their language legally gets them over the provision. The bigger question is where it will stop. If you have cost recovery for APDs, do you also allow it for rights-of-way or other procedures?”
Tim Spisak, who heads BLM’s fluid minerals division, said Congress reduced the agency’s oil and gas operations budget by $25.5 million and created a new APD appropriation for that amount. “It put in a mechanism to collect a processing fee and tied it to a reimbursement for the appropriation. BLM gets the same funding level; it’s just broken up into two different funds,” he explained.
But Marc W. Smith, executive director of the Independent Petroleum Association of Mountain States in Denver, said the fee increases the cost of processing a document without improving the level of service.
‘A new tax’
“It’s a new tax on domestic energy production. More important, it doesn’t address any of the ongoing needs of the BLM offices that are trying to keep up processing drilling applications and managing other public lands needs,” he maintained.
“Right now, there’s no promise it actually will go to BLM. The money is earmarked for the general treasury,” Gallagher added. He conceded that the additional cost by itself should not affect overall activity. “If $4,000 is going to queer the deal, you shouldn’t drill the well,” he said.
But he and Smith agreed that such a fee never was part of the original contracts to develop federal energy resources. “It’s a little like a landlord, when you rent an apartment, telling you there’s a processing fee every time you submit your rental payment or pick up your mail,” Smith said.
