Government moves to raise oil royalties

Interior Department will suspend discounted royalties for 19 companies producing heavy oil beginning in November

John Heilprin

Associated Press Writer

With oil prices rising, the Interior Department wants more royalties on energy production.

The department’s Bureau of Land Management gave notice April 27 that it plans to suspend its policy of offering discounted royalties for producers of heavy crude oil, starting in November. There are 19 such companies operating on 39 leased properties nationally.

The discounted rates, which have helped prop up the industry since 1996 when prices were lower, would return when oil prices fall below $24 a barrel for six consecutive months. Heavy oil operators pay a customary royalty rate of 12.5 percent per barrel, but under the royalty relief program that rate has ranged from 3.9 percent to 11.6 percent per barrel, said Patrick Etchart, spokesman for Interior’s Minerals Management Service in Denver.

The bureau also is looking at dropping its discount royalties for more than 400,000 “stripper” wells, which produce 15 or fewer barrels a day, but has yet to make a decision, spokeswoman Celia Boddington said.

Discounted royalties began in 1992 for those wells, which account for one of every six barrels of crude oil produced in the United States, or nearly 1 million barrels of oil a day.