Feds Adopt New Royalty Rules on Oil, Gas and Coal Leases

New rules have been published by the U.S. Department of Interior updating the lease royalties for minerals on federal and Native American lands and how they are calculated.  The government claims it is a change that will make sure taxpayers get all the revenue they deserve.

The new rules will apply to any Native American lands in Oklahoma.

The last valuation rules were put in place in the late 1980s and according to the Interior Department had not kept up with the market changes in the domestic energy markets or technology since then.

“These improvements were long overdue and urgently needed to better align our regulatory framework with a 21st century energy marketplace, offering a simpler, smarter, market-oriented process,” said interior Secretary Sally Jewell in announcing the rules.

The rules apply not only to the market value of Federal oil and gas but also Federal and American Indian coal.

“This valuation rule is important because it ensures, in part, that our federal coal program is properly structured to obtain all revenue due to taxpayers,” added Jewell.

The rule reaffirms that valuation, for royalty purposes, is best determined at or near the lease and that gross proceeds from arm’s-length contracts are the best indication of market value.

The final Consolidated Federal Oil & Gas and Federal & Indian Coal Valuation Reform Rule will be published in the Federal Register on July 1, and becomes effective on January 1, 2017. The final rule can be viewed here.

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