Alliance Responds to Interior Dept.’s Royalty Valuation Rule

June 30, 2016

DENVER - In response to the U.S. Department of the Interior’s Office of Natural Resources Revenue (ONRR) release of a final regulation on valuing royalties from oil and natural gas produced on public lands, Western Energy Alliance issued the following statement attributable to Kathleen Sgamma, vice president of government and public affairs:

“We keep hearing from the Administration that it wants to get ‘every dollar due’ from oil and natural gas production on federal lands. Yet there are no ‘dollars due’ if you drive production off federal lands by making it too time consuming, complex and costly. The Administration continues to further discourage development on federal lands with this and other adversarial regulations that reinterpret laws contrary to the will of Congress. Small businesses will be particularly hard hit with this regulation, which disallows normal deductions for the cost of doing business, charging royalties for money producers haven’t earned. For all the complaints against the IRS, American taxpayers are allowed to deduct expenses and aren’t taxed for income they haven’t made, yet the Interior Department has finalized a rule that does just that.”

“The Congressional Research Service just came out with its annual report showing that natural gas production is down 15 percent on federal lands even as it has skyrocketed on non-federal lands by 66 percent since 2008. The numbers are a stark illustration of how this Administration’s energy policies are failing. The reinterpretation by ONRR will disallow cost allowances of about $.40 per thousand cubic feet (Mcf) of natural gas. With natural gas prices under $3.00 per mcf, that’s enough to render significant amounts of natural gas development on public lands uneconomic, which means it simply goes away. Being penny wise and pound foolish is a good way to ensure Americans don’t receive royalties from the energy they own.”