API, IPAA criticize Salazar's plan to raise royalty rates

US Sec. of the Interior Ken Salazar’s plans to raise onshore oil and gas royalty rates by nearly 50% are a bad idea, the American Petroleum Institute and Independent Petroleum Association of America separately said on Feb. 16.

Their statements came after Energy & Environment Daily reported that Salazar told the US House Interior Appropriations Subcommittee on Feb. 15 that raising royalties for oil and gas produced from federal onshore acreage from 12.5% to 18.5% “is an appropriate fair market value rate.”

The increase would fly in the face of the “all-in, all-of-the-above” energy strategy US President Barack Obama outlined in his State of the Union address, Independent Petroleum Association of America Pres. Barry Russell said.

“While oil and gas production on public lands is one of the top sources of federal revenues, providing $10 billion in bids, rents and royalty payments in recent years, the proposed 50% increase in royalty payments will further deter production and stifle much-needed investment in American’s struggling economy,” he warned.

Erik Milito, API’s upstream and industry operations director, said that the oil and gas industry already contributes $86 million/day to the federal government in taxes and royalties.

“The oil and gas industry is one of the few bright spots in the economy, creating hundreds of thousands of jobs even when others are laying people off,” he said. “The United States has some of the largest known resources of oil and gas in the world, but the administration continues to pursue policies that will slow development, reduce revenues to the government over time, destroy jobs, and undermine our energy security.”

Contact Nick Snow at nicks@pennwell.com.

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