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1 Elizabeth Malm, Federal Mineral Royalty Disbursements to States and the Effects of Sequestration 1 (2013)

handle is hein.taxfoundation/ffdhbxz0001 and id is 1 raw text is: FUDMNFiscal Fact May 30, 2013 No. 371 Federal Mineral Royalty Disbursements to States and the Effects of Sequestration By Elizabeth Malm Introduction Federal mineral royalty revenues are often overlooked, but they represent a substantial portion of some states' revenues. Certain minerals, such as coal, oil, and gas, are available for extraction and production via a contractual agreement between a private producer and the federal government known as a mineral lease.1 These leases grant rights to firms for a certain period of time and outline payments to be made by producers to the federal government.2 Some of these payment revenues are then distributed back to the state in which the mineral production took place. One of these payments is a royalty, which is calculated based on the amount of mineral production on the leased land. The term royalty is a historical artifact-it literally means a payment to the crown.3 Today, the royalties are payments to a landowner (in this case, the federal government) for the right to extract minerals from the land. Payments are calculated as a percentage of revenue.4 In fiscal year 2012, 36 states received federal mineral royalty disbursements totaling $2.1 billion. In March, the Office of Natural Resources Revenue announced that, due to sequestration, $110 million in royalty revenue payments to states would be withheld.5 Some state officials contend that royalty payments ' A mineral lease can be onshore, in which production takes place on land, or offshore, in which production takes place at sea. For more information on the boundary for offshore oil and gas production, see U.S. Energy Information Administration, Frequently Asked Questions, . -;L /..: ..v... ..o.. !L.qsiihq cb t :d CS 6. 2 U.S. Government Accountability Office, MineralResources: Mineral Volume, Value, and Revenue, Memo accompanying a report to the Subcommittee on National Parks, Forests, and Public Lands (Nov. 15, 2012), hnu:iw ,4 , 0 2 0O ]')/\V asJd L~g t i-, jY .,t2O I 2 /12 /] 1 o a tN a ---- ----------------------------i------------'%--------------------- ------c --------- L------------ i-----------------L----------------- Oil and Natural Gas Leasing, in ENCYCLOPEDIA OF ENERGY, ,) i: w t ,.//: \ . R'e fl e!,v coni /vf , t ny,_.-_ t t, iOU a31d, n I v:,rI!. ,A _- ing [hereinafter Oil and Natural Gas Leasing]. According to the American Petroleum Institute, the Mineral Land Leasing Act dictates that for onshore leases, the royalty share is one-eighth of the value of production. For offshore production, the leasing rate as of 2008 was 18.75 percent. See American Petroleum Institute, Oil and Gas Development on Public Lands are an Important Revenue Source for Government, 5 Western senators seek to restore minerals payments, CASPER STAR TRIBUTE, May 7, 2013, Lyy!/mti<˘ccJl.'vwsia - r10.2:~ wesYJX(N Mlf\'.J - ae~a rs~eu :C'4tiff-.ala U AX : ui~ ra1b~b .cfI f55d7. ece-d910&c.5 11(895 I ni.