US to propose higher royalty rates for drilling federal land

17 Apr11:38 PM

[WASHINGTON] The US government would get a larger share of oil and gas revenue from federal land under a proposal the Interior Department is expected to announce on Friday.

The federal government is entitled to a 12.5 per cent share of oil and gas sold from federal land, chiefly in Western states. The stake for offshore drilling is usually set at 18.75 percent.

Friday's move will open a discussion with the energy industry, environmentalists and other stakeholders about how to set future royalty rates for onshore drilling, said a government official briefed on the proposal.

Oil and gas output has been climbing across the nation in recent years due to advanced drilling techniques. But most of that production is on private land in energy patches like North Dakota's Bakken or the Eagle Ford fields of Texas.

Increasing royalties will make sure taxpayers profit from the national energy renaissance. But new controls are also needed to protect federal land where drilling occurs, officials said.

Specifically, the Interior Department is considering whether to require energy companies to hold more cash or insurance to restore depleted drill sites and increase other drilling fees.

The proposal will be open for comment through at least the end of May and officials said they expect wide feedback.

Only about 5 per cent of total US oil production was on federal land in 2013, according to the latest available data from the Energy Information Administration.

REUTERS