Obama Hikes Royalties on Oil Industry by 50%

For the first time since the 1920s, fees for oil drilling on public land are going up, in an Obama administration Interior Department rule that does not require congressional approval.

The election-year timing almost seems designed to wave a red flag in front of the most obdurate opposition party any president has ever had to contend with, with lavish funding from the fossil industry.

Making the bold move even riskier; this is the first election year after the Citizens United decision, which is sure to unleash yet more fossil industry money against any impediment to the richest industry on the planet.

Interior Secretary Salazar told E&E that no administration has raised royalty rates on oil production since the 1920s, and that the 50 percent raise is necessary to generate a fair return for American taxpayers. The proposed rates will go from 12.5 percent to 18.75 percent.

Offshore oil drillers already pay the 18.75 percent rate.

“It is an appropriate fair market value rate,” Salazar told a panel of House appropriators this afternoon. “The underlying principle of that is we are mandated by statute, mandated by fairness, to make sure the American taxpayer is getting a fair return for the oil and gas that the American people own.”

But there is a new wrinkle to this story. The Obama administration mounted an organized push to develop the nation’s renewable energy resources resulting in a quadrupling of solar and wind projects on public land.

In contrast to the sweetheart deals given oil drillers, these renewable energy companies signed land leases that generate a fair return – as I covered in Utility-Scale Solar on BLM Lands to Generate Substantial Income for Taxpayers.

For example, it was estimated in 2010 that the 1,000 MW Solar Millennium project in California will be generating $9.5 million every year between its per-MW fees and land leases.

At the time I was surprised at the high rates expected from a nascent industry, compared with the much better positioned oil industry. Now I think that Obama was setting the stage for this rule change.

This is the first administration that has dared to demand fair recompense on our behalf, as the owners of those public lands, from the richest industry on the planet – since 1920. Other nations demand higher returns for exploiting publicly held assets, according to a Bush era GAO report.

And since a newborn renewable industry has already manned up to paying us – shouldn’t Big Oil?