US Proposes Higher Royalty Rates For Drilling Federal Land



Reuters

WASHINGTON, April 17 (Reuters) - The U.S. government would get a larger share of oil and gas revenue from federal land under a proposal announced by the Interior Department on Friday.

The federal government is entitled to a 12.5 percent share of fossil fuels sold from federal land, chiefly in Western states. The stake for offshore drilling is usually set at 18.75 percent.

Friday's move will open a discussion with the energy industry, environmentalists and other stakeholders about how to set future royalty rates for onshore drilling, officials said.

Reforms will "ensure that American taxpayers receive a fair return from energy resources developed on their public lands," Neil Kornze, director of the Interior Department's Bureau of Land Management, said in a statement.

Oil and gas output has climbed across the nation in recent years due to advanced drilling techniques. But most of that production is on private land in energy patches like North Dakota's Bakken or the Eagle Ford fields of Texas.

Increasing royalties will make sure taxpayers profit from the national energy renaissance. But new controls are also needed to protect federal land where drilling occurs, officials said.

Specifically, the Interior Department is considering whether to require energy companies to hold more cash or insurance to restore depleted drill sites and increase other drilling fees.

The proposal will be open for comment through at least the end of May and officials said they expect wide feedback.

Only about 5 percent of total U.S. oil production was on federal land in 2013, according to the latest available data from the Energy Information Administration.

The Interior Department had considered boosting onshore royalty rates during President Barack Obama's first term in office but those plans were shelved before his 2012 reelection.

The American Petroleum Institute, a leading voice for the oil industry, has said red tape and bureaucracy are already discouraging energy development on federal land and higher royalties could be even more of a deterrent.

"Yet another set of costly changes to federal rules could drive more economic development and job creation off public lands," said the trade group's Erik Milito.

(Reporting by Patrick Rucker; Editing by Bill Trott, Dan Grebler and Meredith Mazzilli)



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