Leave federal royalties, revenue shares alone, western governors urge

Shares of federal revenue and royalties from oil and gas operations on public land and offshore should continue to go directly to states and counties and not be reduced to offset cuts elsewhere in the federal budget, western US governors said in a policy resolution adopted during their recently concluded winter meeting in San Diego.

“These agreements and programs are not proper subjects for cutbacks and sequestration,” it stated. “For example, royalty payments owed to states are not federal expenditures. Federal land management agencies simply administer the distribution of those revenues to states. The federal government has no discretion over this money. Payment to the states is the only authorized use for these revenues.”

The governors also urged Congress and federal regulatory agencies to involve states earlier and more substantially in the development, prioritization, and implementation of federal environmental statutes, policies, rules, programs, reviews, budget proposals, budget processes and strategic planning.

The resolution was one of seven adopted as the Western Governors Association wrapped up its winter meeting on Dec. 14. Others dealt with water quality in the West, building a strong state-federal relationship, tax-exempt federal lands and secure rural schools, storage and disposal of spent nuclear fuel and other radioactive waste, regulation of coal combustion residuals, and financial assurance regulations.

“The federal government must honor its statutory obligations to share royalty and lease payments with states and counties in the West to compensate them from the impacts associated with federal land use and nontaxable lands within their borders,” the revenue and royalties policy resolution asserted.

It said the US Department of the Interior and other federal government entities are examining and revising regulations and policies governing federal management of land and minerals. “In particular, DOI is undertaking an effort to modify mineral lease regulations for coal, oil, and gas,” the resolution said. “This effort has impacted the pace of mineral leasing on federal lands, delayed mineral leasing efforts that were ongoing, and created uncertainty about future leasing efforts.”

Limited participation

Despite states’ substantial interest in revenue associated with these programs and agreements, the federal government has often limited states’ participation in decisions affecting this revenue, according to the resolution. “For example, in rule-making related to oil and gas and in the federal coal program, previous avenues for state involvement were eliminated and prospective state involvement has been limited to participation as a general stakeholder,” it said.

Federal processes and regulations also can create uncertainty regarding sales and leases of these or slow the pace of sales and leases, the resolution said. This could adversely affect states’ receipts of their share of these essential revenues, it said.

“States should be provided meaningful opportunities to cooperate on decisions related to these historic programs and agreements in a manner commensurate with their special status as recipients of the resulting revenues,” the resolution said. “In particular, governors support efforts to provide the states with a forum to advise DOI on federal mineral leasing royalty policy. This includes reestablishment of the Royalty Policy Committee.”

Interior’s Office of Natural Resources Revenue distributes royalty and leasing revenue shares to states from oil, gas, and mineral operations on federally controlled acreage within their borders, as well as to American Indian tribes and designated federal funds. It distributed nearly $1.33 billion to 37 states, as well as counties and other political subdivisions, during fiscal 2016, ONRR said.

This included $314,205 disbursed to Alabama, Louisiana, Mississippi, and Texas and their eligible coastal political subdivisions under the 2006 Gulf of Mexico Energy Security, and more than $3.2 million to 35 counties in eight states from geothermal energy production.

Of the 37 states, ONRR said, Wyoming received the largest amount, $664.3 million; followed by New Mexico, $368.6 million; Colorado, $83.9 million; Utah, $68.1 million; and California, $38.8 million.

Contact Nick Snow at nicks@pennwell.com.

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