According to a Bloomberg report Dec. 17, government auditors criticized the U.S. Interior Department for considering and then delaying plans to raise the royalty rate for oil production on public lands, saying that’s resulted in “foregone revenue.”
The report “drives home the point that the Interior Department, and especially its Bureau of Land Management (BLM), may not be keeping up with times,” Oregon Democrat Ron Wyden said in response to the report.
Interior Department spokeswoman Jessica Kershaw said in response to the report that “it remains a high priority for the Department to modernize its regulatory regime in order to set onshore royalty rates and ensure a fair return to American taxpayers.”
The Interior Department estimated that onshore royalty rate changes in line with what it considered in 2012 could increase revenue collections by about $1.25 billion over 10 years, according to the U.S. Government Accountability Office (GAO).
The BLM scrapped plans in 2012 to raise the standard royalty rate on public lands to 18.75% from 12.5%, according to a GAO report released Dec. 17. That delay contrasts the Department’s increase of royalties on offshore production in U.S. waters.
Oil and gas production in the U.S. is booming due to hydraulic fracturing and horizontal drilling. U.S. petroleum production is set to grow by 47% in 2020 to 9.55 million bbl/day, the U.S. Energy Information Administration (EIA) said Dec. 16.
That growth in domestic supply is displacing imports. But it isn’t triggering a dramatic cut in pump prices for consumers. Gas prices are forecast to stay at more than $3 a gallon. At those prices, drillers have an incentive to pay more for access to federal lands, according to the GAO researchers.
Leases on the nation’s 700 million subsurface public acres and 1.7 billion offshore acres raised $9.7 billion for the U.S. Treasury in 2012, making it one of the largest sources of nontax revenue for the government. Companies earned $66 billion from sales of oil and gas produced on federal lands and waters.