 |
| mineral royalties |
Before taking up on the
assumption that the people are being cheated in the computation of oil and gas,
it is interesting to overview the government’s earnings from these commodities. The United States has earnings of more than 20
billion dollars in taxes, 13 billion dollars in royalty payments, and added
10 million dollars in fees for services rendered later on in relation to
mineral royalties. All these are the figures for the year 2008 alone.
Now all the above stated
figures are comparable to the leading industrial economies of the world. These
figures are also way higher than most of the nations’ fiscal year earnings for
a complete year. The levy system of the United States differs a great deal from
that of the rest of the worlds. The reason for it is that the United States
puts a higher rate of interest in the collection of upfront fees. They do this
as a counter measure to prevent losses of the buyer of mineral royalties which are a constant risk
when dealing in mineral and gas exploration. The recent catastrophe in the Gulf
of Mexico is an example when the upfront fees collected by the US were used to
put the load back on the companies rather than the government. So this basically ensures that the share of
the government is secured, irrespective of the company’s ability to generate
income. Another source of commission for the government is the U.S. Department
of Interior which collects royalties from companies when the mineral rights are
government owned entities. The companies
also have to pay individual owners their share.
To provide a computation
of how the rates of oil and gas royalties are collected by the government, they’re
equivalent to 1/8th of the total onshore value federal lease
production and approximately 1/6th of the offshore value lease
production. These estimations are restricted in the ‘Mineral Lands Leasing Act’
and the ‘Outer Continental Shelf Lands Act’.
If a company were to drill
in the Us Gulf of Mexico for these minerals, then they would have to pay nearly
three times as much as if they were to relocate someplace else.
But the question arises,
with such prohibitive costs and high risk of default risks how do they continue
to earn revenue and collect oil and gas revenues? The answer is quite simple.
They do so by pumping the industry with continuous incentives and tax breaks to
attract more and more companies. Amongst the current incentives offered by the
US government: Tax and sales breaks, (for the initial stages of the program);
lenient terms of repayment, extension in payment dates and low interest rates,
offers for provision of assistance (sometimes for free) on R&D aspect as
well; also provision of floating construction bonds for the company’s
betterment.
These incentives reflect
the US government to be a country very open towards oil and gas investments
within their jurisdiction, with the exception of a very few countries. One
thing that the US has going for them in their favour is that they have large
resources of oil and gas resources. A very few countries of the world have that
amount of resources in the oil and gas royalty department. These large
quantities of oil and gas reserves are a good new for all, i.e. landowners, the
oil and gas companies, and the federal government as well. https://buyoilandgasroyalties.wordpress.com
No comments:
Post a Comment