BLM to Suspend Royalty Reductions for Type of Crude Oil

The BLM gave notice today that the agency will suspend its reduced royalty program for heavy oil, a type of crude oil. A notice published in today’s Federal Register signaled that the BLM will suspend the heavy oil royalty reduction program effective November 1, 2005. BLM’s regulations allow royalty reductions for heavy oil because of the added expense of lifting it to the surface and processing it. In addition, the BLM is requesting public comments on how the suspension should end.

“This action benefits the taxpayer in times of historically high oil prices,” said Tom Lonnie, BLM’s Assistant Director for Minerals, Realty and Resource Protection.

In order to encourage heavy oil production in times when oil prices made it difficult to produce heavy oil economically, the BLM put in place a program that reduced the royalties that producers paid to extract the resource. With oil prices currently at historic highs, however, the agency deems it unnecessary to provide this incentive.

The heavy oil royalty reduction program has an inflation-adjusted trigger price per barrel that, when reached and maintained over six months, allows BLM to suspend or terminate the royalty reductions after six months’ notice in the Federal Register. Based on BLM’s review, average oil prices have exceeded the threshold at all times during the last six months. Therefore, BLM is giving notice that it will suspend the heavy oil royalty reduction program effective six months after publication of the notice in the Federal Register.

The BLM manages more land – 261 million surface acres – than any other Federal agency. Most of this public land is located in 12 Western States, including Alaska. The Bureau, with a budget of about $1.8 billion, also administers 700 million acres of sub-surface mineral estate throughout the nation. The BLM’s multiple-use mission is to sustain the health and productivity of the public lands for the use and enjoyment of present and future generations. The Bureau accomplishes this by managing such activities as outdoor recreation, livestock grazing, mineral development, and energy production, and by conserving natural, historical, and cultural resources on the public lands.

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