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Report: Onshore Fed Oil Royalty Rate Unchanged Since 1920

PHOTO: There have been calls recently to lift the crude-oil export ban, but before that's done, a new report makes the case that the onshore royalty rate should be updated. It hasn't changed since 1920. Photo courtesy of USGS.
PHOTO: There have been calls recently to lift the crude-oil export ban, but before that's done, a new report makes the case that the onshore royalty rate should be updated. It hasn't changed since 1920. Photo courtesy of USGS.
March 11, 2014

HELENA, Mont. - There have been calls recently to lift the crude-oil export ban, but a new report makes the case that, before the ban is eliminated, the onshore royalty rate should be updated. It hasn't changed since 1920.

According to Ross Lane, director of the Western Values Project, their report outlines how much Montana would have shared in those royalties if the rate matched what's charged for offshore drilling, and it amounted to nearly $9 million in 2012. Lane said that if crude-oil exports are allowed, production on the Bakken oil field in Montana and North Dakota will grow, and the state could put the money to good use.

"Folks in Eastern Montana are seeing those impacts every day," he said. "I'm sure there are folks who have high-paying jobs, but there's also projects like building new roads, or building new water treatment facilities, or building new schools."

The federal royalty charge is split with states about 50-50. The longstanding federal rate is 12.5 percent, while Montana's state rate for state lands is nearly 17 percent, and the federal offshore rate is closer to 19 percent.

Raising the rate is unpopular with oil companies, which warn that it would mean lost jobs and higher prices at the gas pump. Lane pointed out that the U.S. royalty rates are among the lowest in the world: Canada charges up to 45 percent and there are still plenty of jobs and plenty of oil business for that country.

"We're talking about American energy, American jobs," he declared. "We should be talking about a fair return for the American taxpayer."

Texas charges 25 percent on state-owned lands.

The full report, "The Oil Export Ban and the Taxpayer: Low royalty rate ensures Americans lose," is at WesternValuesProject.org.

Deborah Courson Smith/Deb Courson Smith, Public News Service - MT