US Interior Department Considers 'Variable' O&G Royalty Rates

Interior Secretary Ken Salazar
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According to Reuters, the Obama administration is mulling "variable" royalty rates for drilling on federal lands that would reflect the difficulty of tapping oil and natural gas supplies.

Speaking at the Reuters Global Climate and Alternative Energy Summit, U.S. Interior Secretary Ken Salazar said that the Interior Department intends to issue proposals by the end of the year to update the royalty rates and ensure that oil companies pay reasonable rates as oil prices rise.

"We are taking a look at that ["variable" royalty rates] to see what makes sense in getting a fair return for taxpayers," Salazar is quoted as saying.

With this option, rates would be higher for lower-risk oil and gas fields, as well as when companies know in advance the reserves' estimated location. Conversely, the rates would be lower for higher-risk oil and gas exploration areas and exploratory drilling similar to "wildcatting", which may or may not result in a commercial discovery, Reuters noted.

Additionally, Salazar mentioned that the Interior Department is currently assessing the government's royalty-in-kind program, as well as a reorganization of the Minerals Management Service and Bureau of Land Management -- agencies that collect royalties and issue drilling leases, Reuters reported.


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David | Sep. 10, 2009

Please explain how on earth this will help our economy. Taxing an industry that employs 9 million people in the United States is going to help the economy? It's going to open the door for more jobs? How? Making it harder to drill and DO THEIR JOBS is going to open the door for more jobs?

Art Vandeley | Sep. 10, 2009
They can sure fine tune squeezing every drop of tax money out of the O&G industry.

Scott | Sep. 9, 2009
This is in no way shape or form a bold move, this is dangerous grounds for all US oil and gas drilling contractors. Why is the federal deficit being placed on the oil and gas industry? When is America going to wake up and see what is happening to us? We taxpayers have just spent another 35 billion dollars or more to save 350,000 million dollars to reduce gas consumption due to clunkers. Another good choice by Obama.

Keenan | Sep. 9, 2009
A return for the taxpayers? What are you thinking Mr. Salazar? More money for you and your buddies, NOT THE TAXPAYERS! Is this another way to kill the oil field WORKERS? I have worked in the oil field for years and have never had to struggle as me and my 5 kids are now thanks to high taxes on the oil companies. What happened to we need to be less dependent on foreign oil? I have heard this for years. As you know there are thousands of oil field workers out of work so why not go ahead and KILL US ALL.

Cam Snow | Sep. 9, 2009
If they get this passed through, we will once again get to see the ignorance of politicians and regulators when it comes to the difficulty associated with accessing harder to reach reserves. Add this to the almost guaranteed windfall profit tax that the Obama administration will place on oil and gas companies if commodity prices rebound much above $100/bbl and we will see a premature death for much of the US oil and gas industry.

Herman | Sep. 9, 2009
I think this is a bold move to help get the economy back on track to its rightful place. This will also open the door for more jobs in the U.S. for the unemployed in all areas of employment.

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