WASHINGTON (AP) — The Obama administration took a first step Friday toward a possible increase in fees charged for oil and gas companies to drill on federal lands.
The Bureau of Land Management issued a notice seeking public comment on whether regulations are needed to give the government more flexibility in setting its fees.
Government auditors have consistently questioned whether the 12.5 percent royalty now being charged is too low. But a low royalty rate also encourages oil and gas exploration, and any increase would likely raise protests from industry and others that it will lessen production and increase prices at the pump.
Interior Secretary Sally Jewell says the current regulations have failed to keep 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," Jewell said in a press release.
The Government Accountability Office has recommended that BLM through the rule-making process be allowed to raise or lower onshore royalty rates as necessary. The auditors noted that the royalty rate for some offshore leases exceeds 18 percent. They also said the bureau needs to do a better of justifying any changes it makes.
"Ensuring that the federal government is obtaining fair return for the resources it manages on behalf of its citizens is especially important as the country faces ongoing fiscal challenges," auditors said.
Julia Bell, a spokeswoman for Republicans on the House Committee on Natural Resources, described the Obama administration's review of the fees as "the latest regulatory assault on oil and gas development on federal lands" and that the administration shouldn't make it harder for producers to operate there.
"Yet another set of costly changes to federal rules could drive more economic development and job creation off public lands," said Erik Milito of the American Petroleum Institute.
As part of its review, the Bureau of Land Management will also look at other fees charged for drilling on federal lands, such as minimum bids for lease sales and rental fees charged before a lease starts producing oil or gas. The government also requires oil and gas companies to provide a bond to ensure drillers are meeting their lease terms and doing required reclamation work.
"Today's bonding rates were set when Dwight D. Eisenhower was president," said BLM Director Neil Kornze. "We are long overdue to consider an update that will help us ensure that oil and gas sites are properly managed and reclaimed and that taxpayers aren't left picking up the tab."
Matt Lee-Ashley, a senior fellow at the Center for American Progress, a liberal research and advocacy group, applauded the review.
"The royalty rate for oil and gas on U.S.-owned lands has lagged behind the royalty rate of states and for offshore areas like the Gulf of Mexico, and has been costing local governments and taxpayers hundreds of millions of dollars in lost revenue," he said.
A report last year by the Center for Western Priorities, a research group, said most oil and gas producing states in the West charge higher royalty rates than the federal government does. Colorado and Montana charged a royalty rate of 16.67 percent, North Dakota and New Mexico charged a rate of 18.75 percent and Texas charged 25 percent for drilling that occurred on state lands, the report said.