Interior plans oil royalties overhaul

Royalties from oil-and-gas production on federal lands and beneath federal waters is a major source of non-tax revenue. Interior collected $9.1 billion from energy-related activities in fiscal year 2010.

“These changes could dramatically improve compliance and reduce administrative costs for industry and the government, as well as better ensure proper royalty valuation by creating a more transparent royalty calculation method,” the department said Tuesday in a statement.
 
Salazar said Tuesday the effort is aimed at providing “cost savings to industry while ensuring the American taxpayer is properly compensated for the use of our Nation’s resources.”

The proposal will be revenue-neutral and won’t change existing royalty rates, the department said.
 
The Interior Department plans to publish a so-called advance notice of proposed rulemaking within a week. The public will have 60 days to comment on the proposal.

David Hayes, deputy secretary at the Interior Department, discussed the proposal at a House Oversight and Government Reform Committee hearing Tuesday.

Hayes said the current way royalties are collected, using case-by-case analysis, has “a lot more potential for expense by the industry and the agency and for potential abuse.”