Bloomberg News

Oil Royalty Raise on U.S. Lands ‘Not Imminent,’ Agency Says

February 07, 2012

Feb. 2 (Bloomberg) -- A proposal to increase royalty rates for energy production on federal lands isn’t imminent and won’t be included with President Barack Obama’s 2013 budget proposal this month, an administration official said.

Environmental groups including the Wilderness Society said the administration should consider raising the payments to as much as 20 percent. The federal government collects 12.5 percent of the value of oil produced on federal land and 18.75 percent offshore.

“We’re working on a proposal,” Deputy Interior Secretary David Hayes said during an interview at Bloomberg News’ Washington office. “It’s not imminent, but we’re working on it.”

Revenue raised by the agency this year will be boosted by the lease sales in the central Gulf of Mexico, which will be “a blockbuster,” Hayes said. The administration will offer access to about 1 billion barrels in June. The previous auction in the same area, in March 2010, brought $949.3 million in high bids.

Hayes also said he’s in “final stages” of evaluating Royal Dutch Shell Plc’s oil-spill response plan for exploration off the coast of Alaska. The Hague-based company plans to start drilling this summer if it receives the necessary permits.

Alaska Drilling

Shell hopes the response plan will be approved in the first quarter, spokesman Curtis Smith said in an e-mail last month. The company needs about 35 permits to start drilling in the Beaufort and Chukchi seas, which may hold about 25 billion barrels of oil.

The Pew Environment Group said the company should first build and test a containment system to make sure oil from a damaged well could be collected under water surface in arctic conditions. Hayes declined to comment on specific elements of the company’s application.

Shell hasn’t been permitted to drill in the Arctic leases it purchased from the Interior Department for more than $2 billion in 2005 and 2008.

Imports of oil have declined during the Obama administration, and while offshore production slowed after the April 2010 BP Plc oil spill, the number of rigs in the Gulf of Mexico is expected to reach the pre-spill level by the first quarter, Hayes said.

--Editors: Jon Morgan, Steve Geimann

To contact the reporter on this story: Katarzyna Klimasinska in Washington at kklimasinska@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net


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