IPAA - Independent Petroleum Association of America
09/12/2024 | Press release | Distributed by Public on 09/12/2024 09:48
IPAA Applauds Passage of Oil, Natural Gas “Royalty Resiliency Act” Addressing Outdated Federal Lands Reporting Processes
WASHINGTON - The Independent Petroleum Association of America (IPAA) - advocating for thousands of oil and natural gas producers that develop 90 percent of wells nationwide - issued the following statement on the passage of H.R. 7377, the "Royalty Resiliency Act" yesterday in the U.S. Senate. Congressman Wesley Hunt (TX-38) is the lead sponsor of the legislation first moved through the House Natural Resources Committee before being passed by the full House of Representatives on July 22.
Background:
IPAA supports H.R. 7377, the "Royalty Resiliency Act" offered by Congressman Hunt. The Office of Natural Resources Revenue (ONRR) is a little-known agency with a bureaucratic regulatory structure that is largely unchecked and has little oversight. While IPAA believes a complete overhaul of the ONRR is desperately needed, the legislation aims to fix a reporting issue dealing with communized agreements.
The "Royalty Resiliency Act" requires the Department of the Interior to make a timely determination regarding the amount of production operators pay royalties on to the federal government, so that producers aren't paying excess royalties while they wait for a BLM communization agreement approval.
Current law states that the Secretary shall issue a determination for allocation of production for units and communization agreements within 120 days, however, it also gives the Secretary flexibility to exceed the 120-day deadline by waiving interest due on obligations until a determination is made. H.R. 7377 closes the exception loophole. The legislation also assumes that the pending plan for communization is correct rather than the other way around. This change will save companies from overpaying royalties that ONRR collects interest on while the agency determines approval. It is worth noting that the federal government does not live by these same rules, interest is not repaid to the company when communization plans are finally issued.
Furthermore, current law states that ONRR gets to collect 100 percent of the royalty rate on production even if the federal government does not own 100 percent of the land used during operation. The patchwork nature of land ownership in the west makes this a complicated issue. It is common for federal land to mingle with private or state-owned land on parcels in the west, however, the treasury should only get the percentage of royalty that is rightfully owned by the federal government. H.R. 7377 corrects these flaws and provides a more equitable system where federal royalties are only collected on land owned by the federal government.
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