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To: bitt

So royalty rates are unregulated? I doubt it.


9 posted on 04/15/2022 2:07:17 PM PDT by Sacajaweau ( )
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To: Sacajaweau
So royalty rates are unregulated? I doubt it.

Many years ago, when I had an involvement of sorts with leasing, the federal government folks would set royalty rates from about 1/8 to 1/3 (12.5% - 33.3%), or use sliding scale royalties (royalty rate would vary with production rate). The highest rates were reserved for acreage with the least risk, that was most likely to produce (picture a lease being offered adjacent to a producing field or mine).

If the feds screwed up and set the royalty rate higher than was justified by the data & risk analysis, the lease would often get no bids, or if actually leased, might never get drilled (because even breaking even would be more difficult with a higher percentage going to Uncle Sam, right off the top). Conversely, the federal government could legally reduce existing royalty rates on producing leases, if a rate reduction would delay abandonment and extend the productive life of the property.

Bottom line: an across-the-board royalty rate increase is just another way to discourage domestic oil & gas production.

15 posted on 04/15/2022 4:47:14 PM PDT by Who is John Galt? ("...mit Pulver und Blei, Die Gedanken sind frei!")
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