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Natural Resources & Energy

Study advocates for higher royalty rates on oil and gas, but industry says it will hurt production 

A drilling rig in Jonah Field in Sublette County.
Caitlin Tan
/
Wyoming Public Media
One drilling rig remains on the Jonah Field in Sublette County.

A new study shows that oil and gas companies would have paid billions of dollars more to the federal government had royalty rates been set at higher levels nine years ago.

Just this year, the Biden administration raised royalty rates by fifty percent on oil and gas leases, meaning companies have to pay the federal government more money for gas and oil sold.

A report from Public Citizen, a non-profit consumer advocacy organization, shows the industry would have paid $5.8 billion more had the royalty rate been set higher back in 2013. The state of Wyoming could have seen a return of nearly $1.7 billion, according to the study.

“This money goes back to schools, to roads, to things that really benefit your taxpayers, and your daily life in your state,” Alan Zibel, Public Citizen researcher, said.

But, the Petroleum Association of Wyoming (PAW) said lower royalty rates are crucial for keeping companies interested in drilling.

“When investors are looking at investing in the development of oil and gas resources, an increase in royalty rates really can give them a pause, because it does make operating more expensive,” Ryan McConnaughey, PAW vice president and director of communications, said.

He added that Wyoming already has one of the highest effective tax rates on oil and gas production at 10.1 percent. In comparison, Colorado has a rate of 5 percent.

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