New Minimum Royalty Rates

by Elizabeth Alford on January 18, 2017

Just days before President Obama is set to leave office, he released new shale regulations establishing minimum royalty rates and giving the Secretary of the Interior discretion for increases.

Related: BLM: New Rules Will Ensure Accurate Royalties

The ruling is designed to protect the environment and ensure that taxpayers are fairly compensated, should shale on federal lands ever be drilling commercially.

“This approach allows the Secretary to consider all relevant factors, including geology, technology, costs, and market prices for oil and gas. Until there is a domestic commercial oil shale industry, we can only speculate about what royalty rates those factors would support. (…) These regulations also strengthen environmental protections by requiring additional environmental information and planning to be included in an oil shale development plan, including a plan to protect water resources, an airshed review, an integrated waste management plan, and an environmental protection plan.” – BLM statement

The new amendments add flexibility to the royalty rates that were set in 2008. The BLM rejected a call for a minimum 12.5 percent rate as an alternative, which is what is imposed on conventional oil and gas leases. In a statement, the agency noted there the “significant differences” between oil shale mineral deposits and conventional crude oil reservoirs. They called the effects of any uncertainty about flexible royalties small compared to the financial and technical challenges of producing fuel from shale at prices competitive with conventional oil production.


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