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Permalink Reply by dbob on July 29, 2012 at 14:58

Two Dogs -

there are nominal per acre rents in each year, but the biggest difference is that each and every project entering those minerals gets to go through the NEPA process - wetlands, threatened and endangered species, etc get a lot of extra attention.  Mud plans, casing plans, surface use plans, etc all have to have federal approval.  

Cumulatively, this is a large, hidden cost.  now the 1/8 royalty has harder to defend.  

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Permalink Reply by HBP on July 29, 2012 at 15:28

The Eastern States BLM has said that a royalty bump on Fed leasing is soon to come, but I have heard that for years.  However, the leasing is a competitive bid, so it brings what it will bring.  They had  many tracts in NW LA go for thousands/acre (per acre, not total) back closer to 2008, 2009.  Its very interesting because its a live verbal auction, so all the competitive back and forth some landowners saw in the Haynesville would play out in less than 5 minutes among 3-4 companies in one room...starting at $2/acre.  

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Permalink Reply by Hopeful About Natural Gas on July 29, 2012 at 17:28

we see the same thing on timber leases out in the west. that's just the way they operate. many people have pointed out how much more the taxpayers would make if they got market prices but they respond by saying that's not their mission.  Their mission involves managing the lands.  I don't know ...

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Permalink Reply by RONNY on July 30, 2012 at 3:01

Why does our federal government always get screwed on an OIL Lease?

Because most federal workers are not hired based on intelligence.  JMO

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Permalink Reply by dbob on July 30, 2012 at 3:55

Most of the BLM folks I've met are pretty bright, but hamstrung by regualtion given to them from on high. 

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Permalink Reply by Max on July 31, 2012 at 6:31

http://www.thefreelibrary.com/You+think+the+NSC+is+screwed+up%3F+Ta...

from the story:

 

YOU THINK THE NSC IS SCREWED UP?

 

You can always tell a government program isn't working well when the General Accounting Office decides it can save itself some work by starting each new report on a program with the exact same paragraph. The federal government's royalty management program, operated by the Department of Interior, is a prime example. "Historically, [Interior] has not placed a high priority on the collection of oil and gas royalties," begin the GAO's 1981, 1982, and 1983 reports. "Consequently, serious deficiencies in the collection system that were identified over 20 years ago persist today."

 

During the past 33 years, three task forces, one blue ribbon panel, and five outside contractors have tried to improve the Interior's management of this huge program; the GAO, Interior's own inspector general, and five different congressional committees have weighed in with 18 reports totaling 1,319 pages.

 

Last fall Interior finally came up with a sure-fireway to solve the valuation question: it decided to let Conoco write the guidelines. By the MMS's own estimation, Conoco's proposal would have saved oil and gas companies $600 million. Though the MMS's Royalty Management Advisory Committee vetoed the proposed guidelines by one vote last October, new regulations now pending are no better. If implemented, they would require states and Indians to rebate millions to oil and gas companies for royalties collected since 1982.

 

Problem? What problem?

 

The standing joke among those involved in royalty management is that after 33 years of trying to correct the program's problems, it still takes ten bureaucrats to collect royalties. One to underestimate the amount owed and nine to make sure the payments get screwed up.

 

Moreover, there are still only loose guide lines for setting a price on oil and gas. This leaves both conscientious companies and department auditors confused. Consider this exchange last fall between Bettenberg and Rep. Yates:

 

Yates: How in the world can a company know  whether it is complying with what you expect them to do? If they have no guidelines, how can your auditors know whether the company is complying? Isn't it total chaos?

 

Bettenberg: It's not total chaos.

 

Yates: It is just chaos.

 

Bettenberg: There is a certain amount of chaos out there.

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