Energy & Environment

Interior proposes easing royalty calculations for public lands drilling

The Interior Department on Friday proposed a new rule that would allow oil and gas companies to pay less money to the government in exchange for producing energy on public lands by changing how these royalties are calculated. 

The proposal would allow oil and gas companies to deduct more for transportation and processing costs from the fees they pay. 

It would also use an average weekly benchmark price for the commodities rather than the highest weekly benchmark prices to assess royalty payments for certain sales. 

Proponents say this will ease burdens on regulated industries and promote energy independence. 

"This proposal provides regulatory certainty and clarity to States, Tribes and stakeholders, removing unnecessary and burdensome regulations for domestic energy production," Interior Secretary David Bernhardt said in a statement. 

Opponents argue that the changes unfairly let companies pay less money to the taxpayers. 

"David Bernhardt all along has had one job to do and that is to give as many handouts as possible to his former clients in the oil and gas industry," said Aaron Weiss, the deputy director of the Center for Western Priorities. 

The proposed rule would lessen royalties paid by some oil companies by allowing them to ask the government for transportation cost allowances that exceed the current cap of 50 percent of the oil's royalty value. 

It would also let some gas companies pay fewer fees by allowing them to ask the government for processing cost allowances that exceed the current cap of 66 2/3 percent. 

The department estimated that these changes would result in the oil industry paying the government $11,000 less and the gas industry paying $135,000 less per year. 

This part of the proposal mirrors changes requested by oil lobbying group the American Petroleum Institute (API) last year. 

In a letter to department Assistant Secretary Susan Combs, API senior policy adviser Emily Hague wrote that Office of Natural Resources Revenue (ONRR) limits on deductions companies are allowed to take were arbitrary. 

"Without the ability to report an allowance above 50% and 66.66% respectively, ONRR is left with the task of devising a way for industry to report the sales with no value on their system," she wrote. 

In a statement to The Hill, API Vice President of Upstream Policy Lem Smith said that the industry "welcomes regulations that provide clarity and certainty for energy production on federal lands."

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