BY DENNIS WEBB
A company that holds a federal oil shale lease in eastern Utah says it appreciates the royalty-rate flexibility in new lease rules released by the government last week.
The Bureau of Land Management unveiled federal oil shale regulations on Tuesday establishing that royalty rate structure set in 2008 will now serve as a floor for rates, with the discretion of the Interior secretary to set higher rates on a lease-by-lease basis.
The agency rejected royalty options that included a minimum 12.5 percent rate, the rate it imposes for conventional oil and gas leases. The 2008 rate structure included a rate of 5 percent of the value of production for the first five years of commercial development of a lease, increasing by 1 percent in subsequent years and a half percent in the 13th year, to a maximum of 12.5 percent.
That structure now serves as a minimum. The new regulations give the secretary of Interior discretion to increase the initial rate beyond 5 percent on any individual lease before it is sold. The annual escalation rate still would apply, resulting in a higher maximum rate for the lease.