US Interior to Unveil Oil Royalty Proposals Wednesday

WASHINGTON (Dow Jones Newswires), Sept. 14, 2009

The U.S. Department of the Interior on Wednesday will unveil new proposals for oil and gas royalties, Secretary Ken Salazar said Monday.

Salazar is scheduled to testify before the House Natural Resources Committee, giving the Administration's perspective of panel Chairman Nick Rahall's proposed offshore drilling bill.

The Interior Department has been conducting a comprehensive review of its royalty programs following several years of fee scandals and with the new Administration's plan to move the country away from reliance on conventional fossil-fuel energy.

Based on previous comments, the Secretary is likely to reveal a stricter policy for the royalty-in-kind program -- which allows companies to pay fees in crude in lieu of cash -- and variable rates for leases. In such a program, rates would be based on how difficult the oil or gas is to develop, allowing the federal government to increase lease revenues from the sector but still encourage production in places like the deepwater Gulf of Mexico, where production is expensive and arduous.

The legislation of Rahall, D-W.Va., would end the royalty-in-kind program altogether, consolidate leasing programs under one bureau, and raise the minimum rate to 18.75% -- representing a potential a 50% increase for many leases -- for onshore production.  

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