Carrot and stick: Interior hands out higher royalties but opens new areas to drilling
US boosts royalties, opens new areas to bit
The Interior Department said today it would raise the royalties companies pay the federal government on oil and natural gas drilling in deep waters off the US, and allow exploration in new areas in the Gulf of Mexico and off Alaska's coast.
The department raised royalty rates for most new federal deep water leases to 16.7% from 12.5% of the value of the oil and gas found, which could raise an additional $4.5 billion over 20 years.
The higher royalty rates will take effect with the next auction of federal drilling leases, expected when tracts in the Gulf of Mexico go under the hammer in late August.
The department also said it will have the option to include a contentious area in the Central Gulf of Mexico near the Alabama-Florida offshore border known as Lease Sale 181 and Bristol Bay in Alaska's North Aleutian Basin in an upcoming five-year leasing plan.
"Together, these actions will enhance America's energy security by improving opportunities for domestic energy production," said US Interior Secretary Dirk Kempthorne.
The plan reverses Bristol Bay drilling bans established by Congress and President George H.W. Bush after the 1989 Exxon Valdez oil disaster in Alaska's Prince William Sound.
Former President Bill Clinton in 1998 also used his executive powers to withdraw the areas from lease consideration through 2012. President George W. Bush recently modified that order to permit drilling in the Alaskan and Gulf Coast waters.
Environmental groups say oil drilling could mar Bristol Bay, which has the world's largest wild salmon run and teems with other wildlife like sea otters.
"Bristol Bay is one the most important fisheries in America and in the world," said Carl Pope, executive director of the Sierra Club. "It's incredibly reckless to risk such an outstanding natural resource just to satisfy Big Oil."
Veteran Alaska Republican Senator Ted Stephens said Bristol Bay needs the economic growth that energy exploration could bring.
"The possibility of oil and gas development in Bristol Bay presents a series of new opportunities to the people of this region," Stevens said.
The move comes after Congress voted last year to rescind a 25-year ban on drilling off Florida's coast and to redistribute billions of dollars in federal royalties to four nearby Gulf Coast states.
That bill diverts an estimated $170 billion in federal royalties to states from the federal treasury over 60 years. Drilling royalties are the government's second-biggest revenue source next to taxes.
The new Democratic-led Congress may also try to recast existing leases the government signed with energy companies, including faulty offshore drilling leases issued in 1998 and 1999 that have already lost the US Treasury about $2 billion.
New Mexico Democrat Senator Jeff Bingaman, the incoming chairman of the Senate Energy Committee, said his panel will hold a hearing on royalties in coming weeks, Reuters reported.