May 24, 2011 / 3:41 PM / 8 years ago

Interior Department looking to simplify oil and gas royalties

WASHINGTON (Reuters) - The Interior Department is launching an initiative to simplify the way it assesses royalties for oil and natural gas produced on federal lands, aiming to streamline the process without increasing payments.

In a measure that may help combat criticism that increased safety and regulatory measures are slowing U.S. energy output at a time of near record prices, the department is considering the use of regional market prices to determine the value of the resources produced by private companies on federal land.

Under the current royalty system the department evaluates the negotiated price of oil and gas production on a transaction by transaction basis and then analyses the costs associated with transportation and gas processing.

The changes are not meant to affect the ultimate cost to companies who paid the government $9.1 billion last year to produce energy on federal lands, officials said.

“We’re asking for comment on a proposal that would involve using market based pricing to be the basis of royalty calculation,” Deputy Interior Secretary David Hayes said at a House of Representatives hearing.

The department said its proposal would improve compliance and lower administrative costs for the government and the industry.

“This effort ... aims to provide cost savings to industry while ensuring the American taxpayer is properly compensated for the use of our nation’s resources,” Interior Secretary Ken Salazar said in a statement.

After gathering evaluating public input on the proposal, the department will hold public workshops before drafting regulations.

Reporting by Ayesha Rascoe, editing by Jonathan Leff

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