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Higher oil royalty charges expected from Obama

The Obama administration may be readying for a fight with the energy industry as it prepares to raise royalty charges for oil and gas obtained from public lands—and tighten up practices that have allowed companies to pay less than they should.

Anticipated rollout in 2012 of new regulations to raise royalties could spark a fight with Republicans in an election year, and slightly reduce the spiraling deficit within a decade by adding nearly $1 billion to Interior Department collections.

The Interior Department has a poor track record of collecting royalties. As reported by the Center for Public Integrity's iWatch News , the oil and gas industry regularly underpays  what it owes, with a possible loss to taxpayers in the billions of dollars.

Behind taxes, oil and natural gas extraction from federal lands and waters make up one of the biggest sources of revenue for the government. In fiscal year 2010, Uncle Sam collected about $9.1 billion from oil and gas companies.

In May, Secretary Ken Salazar called for public comment on restructuring and simplifying oversight of the system by a new unit at Interior, the Office of Natural Resources Revenue.

Now the administration is giving the first indications of wanting to raise more revenue by charging more in royalties, at least involving onshore drilling, which accounts for less than half of all oil and gas revenues for the government.

Patrick Etchart, a spokesman for the Interior Department's revenue office, confirmed that the agency may change how the government calculates royalty values. But he declined to describe exactly what the administration has in mind. "At this point we're just soliciting comments and suggestions," Etchart said.

A June 2 Government Accountability Office report urged improvements in oversight, among many changes being debated since the Deepwater Horizon explosion in the Gulf of Mexico, which exposed a raft of regulatory shortcomings.

According to the GAO report, the Interior Department last undertook a comprehensive examination of government compensation for oil and natural gas extraction about a quarter-century ago. The government is losing revenues, though officials are unsure how much goes uncollected. The GAO said Interior "may not be properly assessing and collecting these revenues."

The Bureau of Land Management has remained quiet on royalty rate details and hasn't said how much the rate would change. However, in testimony before Congress in April, BLM's director Robert Abbey predicted the bureau would propose a rule change that would raise the royalty rate from its current 12.5 percent and, "increase oil and gas revenues by more than $900 million over 10 years.