Energy & Environment

Feds weigh drilling fee hike

The Obama administration has begun considering whether to increase rates and royalties imposed on oil and gas companies drilling on federal lands.

The Bureau of Land Management announced Friday that it will seek public comment on rules making changes to royalty rates, rental payments, lease sale prices and other compensation for onshore oil and gas work on federal lands. 


Federal regulators and inspectors have questioned whether the government is leaving money on the table by charging relatively low royalties for onshore drilling on federal lands. The current royalty rate for public land leases is 12.5 percent of the production value. Some states have higher rates — Texas charges 25 percent, according to the Center for Western Priorities — and the rate for offshore drilling is higher, as well.

Interior Secretary Sally Jewell said BLM’s regulations “have not kept pace with technology advances and market conditions” for onshore drilling.

“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,” Jewell said in a statement.

Energy producers, though, warned against raising rates at a time of soft oil prices. 

“The Obama administration’s proposal to increase onshore royalty rates will ultimately result in fewer American jobs, less energy production, and hurt our nation’s energy security,” Independent Petroleum Association of America Vice President Dan Naatz said in a statement.
The move drew a rebuke from Republicans, as well. A spokeswoman for Rep. Rob Bishop’s (R-Utah) Natural Resources Committee said higher royalties represented “another regulatory assault from the Obama administration.”  
 
Oil and gas production on federal lands is down 10 percent since 2010, and “hiking the royalty rates will further curtail production and decrease revenue flowing to the federal Treasury,” spokeswoman Julia Bell said.
 
This story was updated at 3:02 p.m.