Interior won’t lower offshore drilling royalty rates

The Interior Department will not be lowering the royalty rates from profits made from offshore drilling, despite a recommendation from an agency committee comprised largely of energy industry representatives.

Interior Secretary Ryan Zinke announced Tuesday that he will not lower offshore oil & gas royalty rates from drilling on federally controlled waters, citing “record” energy growth.

{mosads}

“The pilot light of American energy has been re-lit by President Trump, and the President’s energy dominance strategy is paying off,” Zinke said in a statement.

“Right now, we can maintain higher royalties from our offshore waters without compromising the record production and record exports our nation is experiencing. The Administration is grateful for the Committee’s hard work on these significant energy issues.”

The decision comes after a department advisory panel voted in February to recommend the administration cut the royalty rates for offshore drillers by a third.

Under the panel’s suggestion, oil and gas produced offshore would be assessed at a 12.5 percent royalty rate, down from 18.75 percent, through 2024.

That recommendation came under scrutiny.

The Royalty Policy Committee comprises energy company representatives, state governments, tribes and Interior officials. The panel argued that the drop in rates would incentivize more production of oil and gas.

Advisers include representatives from Chevron, ConocoPhillips, Shell and the American Petroleum Institute.

Interior cited a number of new factors that led to Zinke’s ultimate determination to not raise the rates, including an “improving economy,” tax reforms, higher energy prices and improved “regulatory certainty.”

A number of Democratic lawmakers had pushed back at the proposal to drop the rates as a “giveaway” to the oil and gas industry.

“This proposal would amount to a giveaway to some of the most profitable companies in the world and rob taxpayers of potentially billions of dollars of revenues over the life of the leases,” wrote Rep. Raúl Grijalva (Ariz.) and Sen. Maria Cantwell (Wash.), the top Democrats on the committees overseeing Interior, in February.

“Selling off public land and resources as quickly as possible at fire-sale prices is not good stewardship; it’s a shell game where the oil, gas and coal industries win and the American taxpayers lose,” they said.

Earlier in the year, Interior announced that it would be looking into expanding offshore drilling on the shores of coastal states. But that proposal met immediate resistance from members of nearly every state likely to be affected. Since then, Zinke has seemingly backed off his plan, telling the House Appropriations Committee last week that there was limited industry interest in offshore drilling compared to onshore options.

“There is no doubt that drilling offshore is more risky than onshore. Investments are moving onshore to the Permian [shale drilling region], that is less risky,” he said.

Zinke has recently also been touting the benefits of wind energy.