	Introduction

Three royalty debates may be revived in the 114 th Congress: (1) whether to increase the statutory minimum rate for onshore federal oil and gas leases from 12.5% to 18.75%, (2) whether to enact revenue sharing laws for Outer Continental Shelf (OCS) leases to include all coastal states, and (3) whether to charge a royalty on hardrock locatable minerals produced on federal public domain lands. House and Senate bills in the 113 th Congress proposed to raise the minimum royalty rate from 12.5% to 18.75% on oil and gas produced on federal leases, improve the permitting process, provide for revenue sharing of OCS revenues, or establish a "gross proceeds" royalty on federally owned locatable mineral production. A mineral royalty is a payment to the resource owner for the extraction of the mineral. In the mining industry the royalty is typically based on production ($/ton) or income (percent of gross or net income). For federal oil and gas leases, royalties are assessed on the gross value of production minus allowable deductions. Raising Royalty Rates

There is precedent for raising federal oil and gas lease royalty rates (which the Secretary of the Interior has the authority to do). Under the Bush Administration in 2008, Interior Secretary Dirk Kempthorne raised the deepwater rate for new leases from 12.5% to 16.67%. Then, in March 2009, Secretary Ken Salazar of the Obama Administration increased the royalty rates for new offshore leases to 18.75%. The lower federal onshore royalty rate for oil and gas may be viewed as an incentive rate to encourage bidding on federal lands when competing for industry investment spending and to provide some balance from the disproportionate time it takes to process applications for permits to drill (APDs) on federal lands. The largely decentralized revenue sharing system for onshore federal energy and mineral resources under the Mineral Leasing Act of 1920 provides the states generally with a 50% share of revenues collected (rents, bonuses, and royalties), less 2% for administrative costs; Alaska, however, receives 90% of all revenues collected on federal leases. These onshore receipts are intended to maintain or establish infrastructure, and mitigate environmental, social, and other impacts from the development of mineral resources. This is different from the much more centralized system used for offshore revenue. The Mining Law continues to provide the structure for much of the western mineral development on public domain lands. Western mining, although not as extensive as it once was, is still a major economic activity, and a high percentage of hardrock mining is on public lands. They contend that restrictions on free access and security of tenure would curtail exploration efforts among large and small mining firms. Mining Law critics consider the claim-patent system a giveaway of publicly owned resources because of the small charges associated with keeping a claim active and obtaining a patent and the absence of royalties.
Three royalty debates may be revived in the 114th Congress: (1) whether to increase the statutory minimum rate for onshore federal oil and gas leases from 12.5% to 18.75%, (2) whether to enact revenue sharing laws for Outer Continental Shelf (OCS) leases to include all coastal states, and (3) whether to charge a royalty on hardrock locatable minerals produced on federal public domain lands. House and Senate bills in the 113th Congress proposed to raise the minimum rate from 12.5% to 18.75% on oil and gas produced on federal leases, provide for revenue sharing of OCS revenues, and establish a "gross proceeds" royalty on federally owned locatable mineral production.
Raising the Onshore Oil and Gas Royalty Rate
A mineral royalty is a payment to the resource owner for the extraction of the mineral. Typically, in the mining industry the royalty is based on production ($/ton) or income (percent of gross or net income). For federal oil and gas leases, royalties are assessed on the gross value of production minus allowable deductions. There is precedent for raising federal oil and gas lease royalty rates. Under the Bush Administration in 2008, Interior Secretary Dirk Kempthorne raised the deepwater rate for new leases from 12.5% to 16.67%. Then, in 2009, Secretary Ken Salazar of the Obama Administration increased the royalty rates for new offshore leases to 18.75%. The lower federal onshore royalty rate (12.5%) for oil and gas may be viewed as an incentive rate to encourage bidding on federal lands.
Revenue Sharing
The largely decentralized revenue sharing system for onshore federal energy and mineral resources under the Mineral Leasing Act of 1920 provides states generally with a 50% share of revenues collected (rents, bonuses, and royalties), less 2% for administrative costs; Alaska, however, receives 90% of all revenues collected on federal onshore leases (less administrative costs). These onshore receipts are intended to maintain or establish infrastructure, and mitigate environmental, social, and other impacts from the development of mineral resources. This is different from the much more centralized system used for offshore revenue, which has much less revenue sharing.
Establish a Locatable Minerals Royalty
The Mining Law continues to provide the structure for much of the western mineral development on public domain lands. Western mining, although not as extensive as it once was, is still a major economic activity. Industry officials argue that the current claim-patent system enhances a company's ability to bring an economic deposit into production. They contend that restrictions on free access and security of tenure would curtail exploration. Mining Law critics consider the claim-patent system a giveaway of publicly owned resources because of the absence of royalties and the small charges associated with keeping a claim active and obtaining a patent.