| Chicago Tribune: Lawmaker wants Mich. to get more in oil royalties |
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| Posted by () on Aug 10 2008 at 10:54 PM |
| MI News >> |
www.chicagotribune.com/news/chi-ap-mi-oilroyalties,0,5094737.story
Lawmaker wants Mich. to get more in oil royalties
LANSING, Mich. - Oil and gas companies would pay Michigan higher royalty fees when leasing government-owned land under a plan by a top Democrat who wants to spend the extra revenue on renewable energy projects.
When oil or natural gas is found on land where the state owns the mineral rights, the state gets one-sixth of the gross proceeds.
Legislation to be announced Monday would boost the state's share to half, raising at least $100 million more per year. Companies also would be given a shorter leash to drill the land or see it leased to somebody else.
The "use-it-or-lose-it" approach is needed because oil companies are claiming leases as assets but letting the land sit dormant, said the proposal's sponsor, Democratic state Sen. Mark Schauer of Battle Creek. There are more than 4,000 active leases in Michigan where oil or gas isn't being produced, he said.
"They're making money on Wall Street, but they're not generating oil and not increasing supplies to reduce the cost at the pump," Schauer said.
Messages seeking comment were left for the Michigan Oil and Gas Association, a trade group including nearly 1,000 oil companies and the exploration arms of utilities.
Schauer doesn't expect oil and gas companies to like the plan, some of which is still being written. The increase in royalty fees would apply only to new leases, he said, and give taxpayers a "fair share" of the value of public land.
Michigan collected $64 million in oil and gas royalties in the last budget year.
Companies sign five-year leases, and the state has the option of doing two one-year extensions. Schauer said he's concerned about wells where oil has been found but isn't being pumped. He'd like companies to have a "fairly narrow window" to act or see their leases expire.
Nationally, oil officials have pointed out that many leased lands are still being explored and may not contain oil and natural gas.
Companies can spend several years after they negotiate a lease securing the permits and other approvals it needs to begin actual production. Or companies can determine that developing a particular tract doesn't make economic sense.
In many ways, the state legislation is an extension of the national debate surrounding high gasoline prices and soaring energy prices.
Republicans in Congress are angry that Democrats blocked them from a vote on allowing more offshore oil drilling and increasing domestic oil supplies.
Democrats have faulted Republicans for obstructing their efforts to, among other things, press oil companies to develop the leases they have on 68 million acres of federal lands and offshore waters. Schauer is running for Congress against Republican incumbent Tim Walberg of Tipton, who wants to lift the offshore drilling moratorium.
High oil and gas prices and record industry prices have in recent years caused states to reevaluate and in at least one case increase their take of revenues from letting companies develop government lands and waters, according to the U.S. Government Accountability Office. The industry typically opposes such moves as discouraging production.
Michigan's royalties from oil and gas development go to the Michigan Natural Resources Trust Fund, which buys land for public recreation. The fund's purpose is spelled out in the state constitution. Schauer said he's confident the Legislature can find a way to spend money from higher royalties to help develop clean and renewable energy.
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