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Energy Law Speeds Up Royalty Collection

Legislation: Measure was backed by companies seeking to cut red tape and administrative costs.

August 14, 1996|From Bloomberg Business News

JACKSON, Wyo. — President Clinton signed legislation Tuesday designed to speed up and simplify the government's collection of royalties from oil and gas companies and give states a bigger role in pursuing the $4 billion in royalties due each year.

Oil and gas companies sought the measure, saying they want the royalty-collection system streamlined to cut administrative costs and bureaucratic hassles.

The new law puts a seven-year statute of limitations on royalty collections, a measure designed to speed the appeals process, and it provides for companies that have paid too much in royalties to receive interest. The law also broadens the Interior Department's ability to allow states to collect royalties themselves.

Clinton said the new law, passed with overwhelming bipartisan support, will help stimulate domestic energy production by making it easier to explore for oil on federal land while protecting the environment.

"By simplifying the way royalties are collected and clarifying existing laws, this law will speed the collection of millions of dollars in federal and state revenues the government is due and create many new jobs for America's workers," Clinton told schoolchildren and industry executives attending the signing ceremony at Teton Science School in nearby Kelly.

Clinton is vacationing in Wyoming with his family this week.

Recently, Clinton lifted the ban on Alaskan oil exports to foreign countries and has in the past supported efforts to increase exploration in the Gulf of Mexico.

Up to now, companies had to keep their books open indefinitely for any royalty audits or disputes; the new law limits that time to seven years. Companies also had to pay interest on underpaid royalties, whereas the government didn't have to pay interest if companies overpaid.

The law also orders that all royalty disputes be resolved within three years. More than $450 million in disputed claims is currently tied up in the appeals process, according to Sen. Frank H. Murkowski (R-Alaska), chairman of the Senate Energy and Natural Resources Committee and one of the sponsors of the bill.

The law will affect all oil and gas produced on federal property, both on and offshore.

Royalties collected from federal lands represent the third-largest source of revenue for the U.S. government. States receive 50% of all royalties collected from federal lands, except Alaska, which receives 90%.

After conflicting court rulings on the existing law and uncertainty about the industry's financial liabilities, oil and gas companies pushed for simplification of the 1982 royalties act. Some company representatives met with Clinton last year to explain the problem.

"Our legislation will empower states to help collect royalty fees from oil and gas production on federal lands," Murkowski said. "The result will be more revenue to state and federal treasuries, less red tape and lower regulatory burdens for American business, and $50 million in savings to taxpayers over seven years."

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