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Offshore Oil Royalties Projected to Rise 68% in Budget

Offshore Oil Platform
The president proposed spending more than $500 million to revamp offshore drilling regulator, the Bureau of Ocean Energy Management, Regulation and Enforcement. Photographer: Tim Rue/Bloomberg

Royalties paid to the U.S. by oil and gas companies for offshore production are forecast to increase 68 percent under President Barack Obama’s 2012 budget.

Receipts will reach $5.97 billion in the year that starts Oct. 1, from $3.56 billion in 2010, according to the budget for the Interior Department released today. Obama also is proposing $25 million in fees from energy companies that hold nonproducing oil and gas leases, part of the administration’s effort to provide taxpayers with higher revenue from minerals development.

“Recent studies by the Government Accountability Office and Department of Interior’s Inspector General have found that taxpayers could earn a better return through more rigorous oversight and policy changes,” Obama said in the budget. “The budget proposes a number of actions to receive a fair return from the development of U.S. mineral resources.”

Obama also plans to charge oil companies for drilling permits and inspecting operations on federal lands and waters, to increase funding of energy oversight after BP Plc’s April well explosion spewed crude into the Gulf of Mexico for 87 days.

The budget proposes a more than sixfold increase in inspection fees, to $65 million in 2012 from $10 million in 2010, the last year in which the department had an enacted budget. The move follows increases in the cost of enforcing new environmental and safety regulations adopted after the BP spill.

Obama would more than double to $14.9 million research into how to prevent and respond to oil spills. The money comes from a tax on oil producers paid into a fund established after the 1989 Exxon Valdez spill in Alaska.

Offshore Revamp

The president also proposed spending more than $500 million to revamp offshore drilling regulator, the Bureau of Ocean Energy Management, Regulation and Enforcement. His proposal didn’t specify the exact level or source of these funds.

At stake is development of resources in the region that produces more oil than the U.K., Qatar or Indonesia, and pumped $35.3 billion in crude in 2009. Exploration in waters deeper than 500 feet (152 meters) remains stalled after a BP Plc’s well in the Gulf exploded in April and spewed crude for 87 days.

The Bureau of Ocean Energy Management is a part of the Department of Interior. Obama proposed keeping the department’s budget at $12 billion in 2012, according to the budget.

Obama would also increase in the Oil Spill Liability Trust Fund by one cent per barrel to raise $451 million through 2021.

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