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The Mis-use of Mineral Royalties

Robert7

Royalty is the cash payment to the lessor (property owner) for the right of extraction of mineral from a property beyond the cost of production expense. It is the percentage paid to investors holding shares in the company and it is the percentage of production payment to the people when the quantity of production of price goes beyond a specified production quota.

For instance; In a contract negotiated in 1995 by President Bill Clinton; The production price was set at $18.00 per barrel of oil. The oil companies were exempt from paying royalty as long as the price of a barrel of oil remained under $18.

But when the price of oil exceeded $18.00 per barrel, the oil companies were required to pay from12% to 20% in royalty to the people. This was a standard condition included in oil drilling contracts since 1856 – establishing a contract of longevity.

This did not happen!

 

Prior to 1995, the United States government, and individual states leased tracts of publicly owned land to exploration – referred to as research and development.

 

The 1995 lease negotiated by the Clinton administration negotiated the royalties of the people to subsidize oil exploration of the drilling corporations – this was never done before. Its intent was done to encourage the opening of new wells for the purpose of making the United States self sustaining for its own oil consumption.

 

The royalty of the people, that is expected to fund the operations of government, was now being used in a manner that should have increased the royalty percentage paid to the people since the people were at this point becoming investing partners in the drilling process – but – the production price clause was omitted from the contract.

 

The result? The oil companies paid no royalty to the government (the people) until the Clean Air Act legislation of 2007 forced the oil companies to reinstate the royalty payment, at a loss of more than 12 Billion dollars that was revenue to fund government functions – don’t worry, the government didn’t really lose any money…they just increased our taxes to make up for the deficit.

 

How much royalty does the Federal Government receive each year on the sale and trade of American natural resources? Approximately $21.6 billion dollars is collected by the government, in royalties and fees for permits. (Information provided by the U.S. Census Bureau)

 

Is this why the price of gasoline is so outrageous?

 

No.

 

The reason the price of gasoline is so high is because of negations made during Uruguay Round conventions that created the World Trade Organization and the WTO’s allowance to let China buy up all the oil reserves in 2005-6.

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Filed Under: Economic Points

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