Clinton believes the 12.5% federal royalty rate is lagging behind

Hilary Clinton promised yesterday that she will raise the royalty rate the government charges companies that extract oil, gas and coal from onshore federal lands from 12.5% if she is elected president.

Clinton’s campaign said she would ensure taxpayers are “getting a fair deal” by raising royalty rates, which are below the 16.7% and 18.8% royalty rates used by most western states, reports Argus. The campaign also said Clinton would close “loopholes” and make sure future leasing decisions account for the accelerated pace of renewable energy development.

The potential Democratic presidential nominee has put a strong focus on renewable energy. Her campaign outlined a strategy for increasing renewable energy production on federal lands tenfold in 10 years.

The oil and gas industry has long fought higher royalty rates on federal lands, saying it is already a more expensive process due to stricter permitting requirements. Stricter permitting requirements make development on federal lands more costly, say industry groups, and raising royalties may drive operators away, thus lowering the government’s overall take of the revenue.

Clinton stands in contrast with presumed Republican nominee Donald Trump, who said last month that he would like to expand energy extraction on federal lands, which he says hold $50 trillion worth of “untapped” oil and gas.

“America’s incredible energy potential remains untapped,” said Trump. “It is a totally self-inflicted wound. Under my presidency, we will accomplish complete American energy independence. Imagine a world in which our foes, and the oil cartels, can no longer use energy as a weapon.”

Some environmental groups were disappointed with Clinton’s stance, however, hoping she would ban fossil fuel production on public lands outright. Groups like The Natural Resources Defense Council’s political affiliate are starting to endorse Clinton, though. In the group’s official endorsement of Clinton, it said she has the experience to build on Obama’s environmental legacy.

The Library of Congress Law Library provides the following comparison of various countries’ oil royalties for 2015 (last updated June 2015). Rates vary widely and many countries have numerous contingencies, as reported in the Library of Congress grid.

Algeria’s base rate is 20% of income, Argentina is 12% of wellhead value, China has rates ranging from 0% to 12.5%, Mexico is 7.5% when oil is under $48 per barrel, India is 12.5% onshore and 5% for first seven years of production from deepwater wells with a jump to 10% thereafter. Kuwait is 15%, Libya is 16.67%, Venezuela’s base rate is 30%, Romania shows 3.5% to 13.5%. The complete list is below.

NOTE: This chart lists royalty rates for crude oil production in selected countries where production occurs on lands owned or controlled in whole or part by the national government. The countries selected include leading oil-producing countries that impose royalties; countries that do not impose royalties are excluded. While there are other fiscal instruments used to raise revenue from oil production, including corporate income taxes, profit taxes, resource rent taxes, value-added taxes, production sharing, and others,[1] this chart focuses solely on royalties.

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Royalty Rates


Contracts entered into prior to Law No. 05-07 (2005) but still in effect: 20% of gross income, which can be reduced to 16.25 or 12.5% in certain regions, and can be reduced to 10% by Ministry of Finance. For contracts under Law No. 05-07, the rate is determined under the terms of each contract, with minimum rates ranging between 5.5% and 20.0% depending on the region and the number of barrels per day of production.[2]


Rates of 12% of wellhead value of product.[3]


A royalty rate of between 10 and 12.5% of the wellhead value of the petroleum applies to all petroleum production in the North West Shelf project area.[4] The rate is set depending on the size of the area covered by the production license.[5] Royalties are shared between the federal government and the government of Western Australia in accordance with relevant legislation.[6]


Pursuant to Law No. 9,478 of August 6, 1997, royalties must be paid monthly from the commencement of commercial production of each field, in an amount corresponding to 10% of the production of petroleum or natural gas.[7] After assessing the geological risks, production expectations, and other pertinent factors, the National Petroleum Agency[8] may define, on the relevant bidding announcements, the reduction of this rate to at least 5% of production.[9] In 2010, Law No. 12,351 was enacted to regulate the exploitation and production of petroleum gas and other hydrocarbons in the pre-salt and other strategic areas. For these areas, monthly royalties must be paid at a rate of 15% of the production’s value, from the date of the start-up of the commercial production of each field.[10]


In Canada, land or natural resources owned by the Crown can be administered federally or provincially. On the federal level, royalty regimes for oil exist for “frontier lands” and “reserve lands.” The royalty rates for the former are prescribed by the Frontier Lands Petroleum Royalty Regulations.[11] The regulations prescribe the same royalty rates for both oil and natural gas. “[T]he royalty consists of a 1% royalty on gross revenue at start-up, increasing by 1% every 18 production months to a maximum of 5% or until payout is reached. After payout, the royalty is calculated at the greater of 30% of net profit or 5% of gross revenues.”[12] At the provincial level royalty regimes vary by province; rates are usually computed based on well productivity and wellhead price, typically ranging from 10% to 45%.[13]


For contracts concluded prior to November 1, 2011, a petroleum royalty is calculated at a progressive rate ranging from 0% to 12.5% depending on annual output.[14] Contracts concluded after that date are not subject to royalties, but rather to China’s resource tax,[15] which for crude oil ranges from 5% to 10% of the selling price.[16]


For production from discoveries following the enactment of Law 756 of 2002, the royalty rate ranges from 8% to 25%, depending on level of production measured by monthly average of barrels per day.[17]


Rate ranges from 12.5% to 18.5%, depending on level of production in barrels per day.[18]


Onshore production, 12.5%; shallow water offshore production, 10%; deepwater offshore production, 5% for first seven years of commercial production, 10% thereafter.[19]


Mineral extraction tax (similar to royalty) escalates with volume of production, with different rates depending on whether it is exported or sold domestically (2.5% to 18%).[20]




16.67% of production[22]


Under the Petroleum Development Act 1974, and following the consent of each state, Malaysia’s national oil corporation, Petronas, was granted exclusive ownership and rights with respect to obtaining petroleum in all onshore and offshore areas of Malaysia.[23] In accordance with the Act,[24] royalty (“cash payment”) rates to be paid on petroleum production are set in agreements between Petronas and the federal government and each of the thirteen state governments. These currently provide for 5% of the value of the petroleum obtained to be paid to the state in which the oil is found, and 5% to be paid to the federal government.[25] According to territorial boundaries set under the Malaysian Constitution, only offshore areas up to a three-nautical-mile limit are governed by the adjacent state;[26] however, this limit was not referred to in the Act or in the agreements signed by Petronas and the states, which has been an issue in disputes regarding royalties.[27]


When the price of oil is lower than US$48 per barrel, a royalty rate of 7.5% is applicable; when the price of oil is equal to or higher than US$48 per barrel, the royalty rate is determined according to this formula: [(0.125 x Oil Contract Price) + 1.5]%.[28]


For onshore and shallow offshore production-sharing contracts: onshore production, 20%; offshore production up to 100 meters water depth, 18.5%; offshore production beyond 100 to 200 meters water depth, 16.67%.[29] For deep offshore production-sharing contracts: inland basin, 10%; 201 to 500 meters water depth, 12%; 501 to 800 meters water depth, 8%; 801 to 1,000 meters water depth, 4%; beyond 1,000 meters water depth, 0%.[30]


The royalty rate is set by each development and fiscal agreement or joint venture agreement between the government and the company.[31]


A royalty on oil extraction is imposed at rates ranging from 3.5% to 13.5%.[32]


Mineral extraction tax in 2015 is Rubles 766 (approximately US$11) per ton, multiplied by coefficients that vary by depletion of reserves and other factors.[33]

Saudi Arabia

A royalty rate is stipulated in each petroleum concession agreement.[34]


Rate is 30% of value of crude oil extracted; amount may be reduced to 20% if oil field is not otherwise economically exploitable; additional royalty in bylaws of joint ventures of 3.33% of value of crude oil extracted.[35]

United Arab Emirates

Royalty rates established in concession agreements on case-by-case basis.[36]


A subsurface use tax (similar to a royalty) of 20% is imposed on petroleum extraction.[37]



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