U.S. royalty rates cut for drillers in Utah

The Trump administration has granted at least 76 petitions to cut royalty payments for oil and natural gas produced on public land in Utah — a move condemned by critics as encouraging production the market doesn’t need.

The Bureau of Land Management approved all 76 petitions it received for leases in Utah since May 1, according to an online government database. The approvals temporarily lower royalty rates so oil companies can pay the federal government as little as 2.5% the value of oil and natural gas extracted from the tracts, instead of the usual 12.5% rate. The initial wave of data only reflects royalty relief applications in Utah.

The move is designed to aid oil companies fighting to survive after the coronavirus pandemic quashed fuel demand and after a price war broke out between Russia and Saudi Arabia. Prices have recovered somewhat from their lows in April as global producers curb output and U.S. oil companies halt production at some wells.

Yet conservationists said the Trump administration’s decision would encourage more oil production at a time when storage tanks are filling up and the industry still needs to curtail output.

“They’re neck deep in oil, and we’re throwing them an anchor,” said David Jenkins, president of Conservatives for Responsible Stewardship. “Not only does this boneheaded move shortchange American taxpayers and Western states at the worst possible time, it incentivizes oil production during the worst oil glut in history.”

The Interior Department earlier rebuffed pleas by some oil industry advocates to grant widespread royalty relief and issue a blanket waiver governing leases on land and in the Gulf of Mexico. The Bureau of Land Management, however, promised to expedite reviews of royalty relief petitions for onshore leases, especially for companies arguing that production from existing wells would be halted without it.

The Bureau of Land Management said it is not granting any special treatment, despite the clamor for blanket relief.

“[Bureau of Land Management] state offices are only approving suspension of operations and royalty rate reduction applications when it is in the best interest of conservation to do so or when it would encourage the greatest ultimate recovery of our natural resources,” the agency said in an emailed statement.