The Obama administration moved forward April 17 to boosting the royalties oil and gas companies have to pay to drill on federal lands.
The Bureau of Land Management (BLM) issued a notice seeking public comment on potential updates to rules governing oil and gas royalty rates, rental payments, lease sale minimum bids, civil penalty caps and financial assurances.
Currently, the royalty rate for competitive oil and gas leases on public lands is 12.5% of the value of production. Current regulation locks that rate at the minimum allowed by law, even though many states and private landowners assess higher rates to oil and gas developed from their lands.
The BLM will open a public dialogue on potential changes to federal onshore oil and gas regulations as part of President Obama’s strategy to support a balanced, prosperous energy future, said Secretary of the Interior Sally Jewell in a statement.
Jewell said the current regulations have not kept pace with technological advances and market conditions.
“It’s time to have a candid conversation about whether the American taxpayer is getting the right return for the development of oil and gas resources on public lands,” she said.
Modernizing the BLM’s rate structures can provide critical flexibility, Jewell noted, especially given the dramatic growth of oil development on public and tribal lands, where production has increased in each of the past six years, and combined production was up 81% in 2014 versus 2008.
The Government Accountability Office has repeatedly concluded that the BLM’s regulations do not provide a reasonable assurance that the public is getting appropriate fair share of the revenue from these resources, according to the BLM release.
The public is invited to submit comments potential changes that would provide the BLM with the procedural flexibility to change the royalty rate in response to market conditions consistent with the procedure for offshore oil and gas leases during a 45-day comment period, which will start after the advance notice of proposed rulemaking is published in the Federal Register next week. A draft of the notice will publish April 21.
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