IPAA Responds to Interior’s Plan to Raise Royalty Rates for Oil, Natural Gas Producers

IPAA Responds to Interior’s Plan to Raise Royalty Rates for Oil, Natural Gas Producers

Washington, D.C. – Independent Petroleum Association of America (IPAA) President and CEO Barry Russell issued the following statement regarding Interior Secretary Ken Salazar’s plan to raise royalty rates for oil and natural gas production on taxpayer-owned lands by 50 percent:

“Secretary Salazar’s proposed plan to increase royalty rates for onshore federal lands by 50 percent flies in the face of a common sense, ‘all the above’ energy strategy the American people were promised by President Obama just weeks ago.

“Time and again, this Administration has offered counterproductive policies; policies that stifle jobs, limit job-creating domestic energy production, and weigh down an already slow economic recovery.  Today is no exception.  While oil and natural 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 percent increase in royalty payments will further deter production and stifle much-needed investment in American’s struggling economy.

“While Interior is of the impression that an increase in royalty rates will increase revenue generated for the federal government, the reality is that such a motion will deter production, reduce investment, and cost the nation millions of dollars in investment opportunity.  It’s a basic economic principle: If you want less of something, tax or charge more for it.  Indeed, in 2007, the Canadian province of Alberta significantly increased royalties on oil and natural gas production.  The result? A plummeting rig count, diminished revenue, and ultimately, a return to a reasonable and fair royalty rate.  But why learn from these failed policies?

“In 2010, oil production on federal land decreased by 13 percent while federal lands saw the fewest number of onshore leases since 1984.  The following year, nine separate federal agencies sought to delay — if not all together halt — oil and natural gas production through layering on burdensome and unnecessary regulations that provided no environmental benefits, costing American jobs and millions of dollars in revenues.

“America’s independent natural gas and oil producers — who on average employ only 12 workers — are proud to provide one of the largest revenue streams to the federal treasury, while producing 85 percent of our nation’s natural gas and 54 percent of our oil.  But with every top-down Washington tax hike, increased royalty payment, or bureaucratic delay, our ability to produce American energy, create jobs, and strengthen our nation’s energy future is further jeopardized, running counter to the Administration’s supposed objectives.”

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Julia Bell