Analysis of Revenue from U.S. Natural Resources BPC STA FF

Transcription

1 Analysis of Revenue from U.S. Natural Resources BPC STA FF JULY 2013

2 ANALYSIS OF REVENUE FROM U.S. NATURAL RESOURCES 2 Presentation Outline I. Executive Summary II. Revenue Mix III. Disbursement Mix Sections of this BPC staff analysis are a based an analysis prepared by Booz Allen for BPC in July The data source is primarily U.S. Department of the Interior, Office of Natural Resources Revenue, (unless specifically noted otherwise)

3 ANALYSIS OF REVENUE FROM U.S. NATURAL RESOURCES 3 U.S. Reported Natural Resources Royalties by Category, Fiscal Years $30 111% -59% $25 Average: $11.7 billion Other Revenues $20 $15 $10 $5 $0-2% 27% 23% -9% -4% 18% 7% Fiscal Year Bonus Rents Other Royalties Oil Royalties NGL Royalties Gas Royalties Coal Royalties Revenues from natural resources on federal lands averaged about $11.7 billion

4 ANALYSIS OF REVENUE FROM U.S. NATURAL RESOURCES 4 Effective Royalty Rates for U.S. Natural Resources, Fiscal Years Percent of Category Revenue to Total Category Sales Value 16% 14% 12% 10% Avg. Effective Rate 13% Oil 13% Gas 11% Coal 10% NGL 8% 6% 5% Other 4% 2% 0% Fiscal Year Effective royalty rates for oil and gas on federal land were about 13%

5 ANALYSIS OF REVENUE FROM U.S. NATURAL RESOURCES 5 Natural Resource Revenues by Source Natural Resource Revenue Disbursements 18% 1% 6% 4% 1% 8% 2% 1% 34% 12% 1% 59% 15% 35% 3% Coal Royalties Gas Royalties NGL Royalties Oil Royalties Other Royalties Rents Bonus Other Revenues U.S. Treasury receives about 59% of revenues and royalties Remainder funds a variety of programs American Indian Tribes & Allottees Historic Preservation Fund Land & Water Conservation Fund Reclamation Fund State Share: Offshore State Share: Onshore U.S. Treasury

6 ANALYSIS OF REVENUE FROM U.S. NATURAL RESOURCES 6 Presentation Outline I. Executive Summary II. Revenue Mix III. Disbursement Mix

7 ANALYSIS OF REVENUE FROM U.S. NATURAL RESOURCES 7 U.S. federal royalties have been collected on mineral, oil, and gas resources for nearly the past century General Mining Act of 1872 First federal authority to collect revenue for prospecting and mining minerals on federal public lands Mineral Leasing Act of 1920 Authorizes and manages leasing of public federal lands for developing natural resources including but not limited to coal, petroleum, and natural gas Federal Oil & Gas Royalty Management Act of 1982 Ensures that all oil and gas that originated on public lands and on the Outer Continental Shelf are properly accounted for

8 ANALYSIS OF REVENUE FROM U.S. NATURAL RESOURCES 8 Since 2010, the Office of Natural Resources Revenue (ONRR) has managed mineral lease and land revenues ONRR Profile Authority under Federal Oil & Gas Royalty Management Act in 1982 Initiated in 2010 under Secretary Salazar, closing former MMS, and establishing BOEMRE, and its three associated agencies, one of which is ONRR ONRR is responsible for the management of revenues associated with federal offshore, onshore, and American Indian mineral leases, as well as revenues received as a result of offshore renewable energy efforts Royalty Collection Process Federal lands are leased to individuals and companies for natural resource development through competitive bid process Lease holders initially pay a bonus upon winning bid, subsequent rent, and royalties on extracted resources from public lands Bureau of Land Management is responsible for federal onshore leasing; Bureau of Ocean Energy Management, Regulation and Enforcement for offshore leasing; and Bureau of Indian Affairs for leasing on Indian lands

9 ANALYSIS OF REVENUE FROM U.S. NATURAL RESOURCES 9 Royalty revenue is collected by both state and federal jurisdictions, with different rates and nomenclature Federal Resource Revenues Federal Royalty Payment made to federal government based on volume or value of commodity removed from federal land; payment based on terms of lease agreement Bonus Payment to the federal government by the successful bidder for a mineral lease; payment is made in addition to the rent and royalty obligations specified in the lease Rent Annual payments made by the lease holder during the primary lease term for the right to use the land or resources for purposes established in the lease. Producing Lease Other Revenues Other Royalties A lease that is producing oil, gas, coal, or other resource in sufficient quantity (and dollar volume) to generate royalty payments Lease obligation revenues, minimum royalty, gas storage agreements, invoices, etc. Does not include rent or bonus Royalties for commodities such as CO2, potash, sand/gravel, sodium, sulfur, etc (not oil, gas, NGL or coal)

10 ANALYSIS OF REVENUE FROM U.S. NATURAL RESOURCES 10 Royalty revenue is collected by both state and federal jurisdictions, with different rates and nomenclature State Resource Revenues Severance Tax Production Tax Payment to state government imposed on the removal of nonrenewable resources Structure: The tax can consist of several items (e.g., Production, Conservation, Hazardous Release, etc.) for some states (e.g., Alaska) Payment method: Percentage of value (e.g., Louisiana-Oil), percentage of volume (e.g., Louisiana-Gas), or both (e.g., Alaska). Values can be market value or gross value. Rate Range: Most oil tax rate based on value is around 2% -15%. Most gas tax rate based on volume is around $0.001/Mcf to $0.01/Mcf. Some states might have variable rates (e.g., Oklahoma) States: Alaska, Louisiana, Oklahoma, Wyoming, etc. Similar definition as the severance tax. Structure: The tax can consist of several items (e.g., Oil and Gas Severance, Conservation, and Emergency School, etc.) for some states (e.g., New Mexico) Payment method: Percentage of value (e.g., Texas), percentage of volume, or both. Rate Range: Most oil tax rate based on value is around 2% -15%. Most gas tax rate based on volume is around $0.001/Mcf to $0.01/Mcf. States: North Dakota, New Mexico, Texas, etc. Royalty Payment to state for extraction of natural resources from state-owned land Structure: Typically based on value of resource extracted, can be based on volume Payment method: Percentage of value as a cash payment, some states accept payment in kind, which the state can sell at a future date(e.g., Alaska) Rate Range: Typically similar rates to severance tax rates, Alaska s rate of 12.5% is near the top. States: Alaska, North Dakota, New Mexico, Texas, etc.

11 ANALYSIS OF REVENUE FROM U.S. NATURAL RESOURCES 11 U.S. Reported Natural Resources Royalties by Category, Fiscal Years Percent of Total 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Fiscal Year Oil & Gas Royalties Average 68% of Total Revenues Other Revenues Oil Royalties Gas Royalties Oil and gas royalties account for more than two-thirds of total revenues

12 ANALYSIS OF REVENUE FROM U.S. NATURAL RESOURCES 12 U.S. Reported Oil Royalties, FY $8 $6 $4 $2 $0 U.S. Reported Natural Gas Royalties, FY $8 $6 $4 $2 $0 Federal Land Oil Production Volumes and Price Dollar Per Barrel Million Barrels Federal Land Gas Production Volumes and Price Dollars Per MMBtu Trillion Cubic Feet Revenue Volume Brent Revenue Volume Henry Hub Royalty revenues are dependent on production volumes and commodity prices

13 ANALYSIS OF REVENUE FROM U.S. NATURAL RESOURCES 13 Effective Royalty Rates for U.S. Natural Resources, Fiscal Years Percent of Category Revenue to Total Category Sales Value 16% 14% 12% 10% Avg. Effective Rate 13% Oil 13% Gas 11% Coal 10% NGL 8% 6% 5% Other 4% 2% 0% Fiscal Year Effective royalty rates for oil and gas on federal land were about 13%

14 ANALYSIS OF REVENUE FROM U.S. NATURAL RESOURCES 14 U.S. Reported Natural Resources Royalties by Land Category, Fiscal Years $25 Average, Fiscal Years % $20 32% $15 $10 $5 64% $ American Indian Federal Offshore Federal Onshore Nearly two-thirds of revenues and royalties are from offshore

15 ANALYSIS OF REVENUE FROM U.S. NATURAL RESOURCES 15 U.S. Reported Bonus Revenues by Land Category, Fiscal Years $10 $9 $8 $7 $6 $5 $4 $3 $2 $1 $ Average, Fiscal Years % 74% American Indian Federal Offshore Federal Onshore Bonus revenues are predominately from lease sales in federal offshore

16 ANALYSIS OF REVENUE FROM U.S. NATURAL RESOURCES 16 U.S. Reported Oil Royalties by Land Category, Fiscal Years $10 $9 $8 $7 $6 $5 $4 $3 $2 $1 $ Average, Fiscal Years % 18% 79% American Indian Federal Offshore Federal Onshore Oil royalties are predominately from the federal offshore

17 ANALYSIS OF REVENUE FROM U.S. NATURAL RESOURCES 17 U.S. Reported Natural Gas Royalties by Land Category, Fiscal Years $10 Average, Fiscal Years $9 5% $8 $7 39% $6 $5 $4 $3 56% $2 $1 $ American Indian Federal Offshore Federal Onshore Gas royalties are increasingly from onshore as offshore declines

18 ANALYSIS OF REVENUE FROM U.S. NATURAL RESOURCES 18 U.S. Reported Coal Royalties by Land Category, Fiscal Years $1.0 $0.8 Average, Fiscal Years % $0.6 $0.4 $0.2 $ % American Indian Federal Offshore Federal Onshore Coal royalties are relatively small and mostly from onshore

19 ANALYSIS OF REVENUE FROM U.S. NATURAL RESOURCES 19 U.S. Reported NGL Royalties by Land Category, Fiscal Years $1.0 $0.8 $0.6 Average, Fiscal Years % 3% $0.4 $0.2 50% $ American Indian Federal Offshore Federal Onshore NGL royalties are relatively small and from both offshore and onshore

20 ANALYSIS OF REVENUE FROM U.S. NATURAL RESOURCES 20 U.S. Reported Rent Revenues by Land Category, Fiscal Years $1.0 Average, Fiscal Years $0.8 20% 0% $0.6 $0.4 $0.2 80% $ American Indian Federal Offshore Federal Onshore Rent revenues are very small but steady across years Primarily from offshore

21 ANALYSIS OF REVENUE FROM U.S. NATURAL RESOURCES 21 Presentation Outline I. Executive Summary II. Revenue Mix a) State Severance Taxes III. Disbursement Mix

22 ANALYSIS OF REVENUE FROM U.S. NATURAL RESOURCES 22 Over 80% of total state severance tax revenue is generated in 7 states State Severances Taxes, $20 Average, Fiscal Years $15 17% 24% 7% $10 7% $5 8% 23% $ % 6% Alaska Texas North Dakota Wyoming Oklahoma New Mexico Louisiana All Other States Source: U.S. Census Bureau Severance taxes Taxes imposed distinctively on removal of natural products (e.g., oil, gas, other minerals, timber, fish, etc.) from land or water and measured by value or quantity of products removed or sold.

23 ANALYSIS OF REVENUE FROM U.S. NATURAL RESOURCES 23 State severance taxes can account for a large portion of total state tax income State Severance Taxes as a Percent of Total State Tax Income, 2011 Alaska 77% North Dakota 49% Wyoming 42% New Mexico Montana West Virginia Oklahoma Louisiana Texas 16% 12% 11% 11% 8% 6% Source: U.S. Census Bureau Severance taxes Taxes imposed distinctively on removal of natural products (e.g., oil, gas, other minerals, timber, fish, etc.) from land or water and measured by value or quantity of products removed or sold.

24 ANALYSIS OF REVENUE FROM U.S. NATURAL RESOURCES 24 State severance taxes have similar pattern as revenues from federal resources Primarily driven by production volumes and commodity prices Federal Resource Revenue, FY $25 State Severance Taxes, $25 $20 $20 $15 $15 $10 $10 $5 $5 $0 $0 Fiscal Year Source: U.S. Department of the Interior, Office of Natural Resources Revenue; U.S. Census Bureau Severance taxes Taxes imposed distinctively on removal of natural products (e.g., oil, gas, other minerals, timber, fish, etc.) from land or water and measured by value or quantity of products removed or sold.

25 ANALYSIS OF REVENUE FROM U.S. NATURAL RESOURCES 25 While the U.S. Census reports state-level severance tax data, other state-level revenues are maintained by state departments of natural resources States have a variety of names for resource taxes Severance tax State royalty Production tax Some of these other revenues can be large; i.e. Alaska s state royalty (and revenue-in-kind program) generated approximately $3 billion in 2009 Data is not maintained in a uniform manner across states, nor is there a centralized collection point

26 ANALYSIS OF REVENUE FROM U.S. NATURAL RESOURCES 26 Presentation Outline I. Executive Summary II. Revenue Mix III. Disbursement Mix

27 ANALYSIS OF REVENUE FROM U.S. NATURAL RESOURCES 27 Group Land and Water Conservation Fund Historic Preservation Fund Reclamation Fund Description Created by Congress in 1965 to provide funds to local, state and federal government to purchase land, water, and wetlands for public use (recreation, providing clean water, preserving wildlife habitats, protecting archaeological / historical sites) Federal resource revenues comprise ~95% of annual funds available, Congress appropriates a portion of these funds to be used during the fiscal year and the remainder are returned to Treasury Established in 1977as a matching grant program for states and Tribal Historic Preservation Officers to support efforts in protecting historic sites. Activities include: survey and inventory, architecture planning, community preservation plans, preservation education, historic building repair Federal resource revenues comprise 100% of annual funds available, Congress appropriates a portion of these funds to be used during the fiscal year and the remainder are returned to Treasury Created in 1902to provide revenues to build, maintain and operate water and associated power projects on Western lands Through FY05, ~48% of fund receipts derived from mineral royalties and ~35% from power sales By law, revenues generated on American Indian lands are returned in full to the tribe with claim to the land from which resources were extracted American Indian Tribes and Allottees U.S. Treasury Resource revenues allocated to the U.S. Treasury are deposited into the Treasury s General Fund, and used to fund overall government operations All resource revenues comprised approximately 0.21% of 2009 Treasury receipts State: Offshore and Onshore A portion of revenues are disbursed to states based on lease; onshore leases, 49% of the money is given back to state where the specific lease is located; offshore leases, portion of royalties from certain offshore federal leases, adjacent to seaward boundaries of coastal states, are shared with eligible states and coastal political subdivisions States use these funds in a variety of different ways, including, for example, education funding, resource conservation, infrastructure improvements, and general funds Source: US Forest Service; Office of Natural Resource Revenue; Dept of Interior; 2010 Historic Preservation Fund Annual Report; Bureau of Reclamation; Congressional Budget Office and Office of Management and Budget ; National Governors Association & National Association of State Budget Officers

28 ANALYSIS OF REVENUE FROM U.S. NATURAL RESOURCES 28 U.S. Natural Resources Revenue Disbursements, Fiscal Years $25 $20 Average, Fiscal Years % 1% 4% $15 $10 12% 1% $5 15% 59% $ U.S. Treasury State Share: Onshore State Share: Offshore Reclamation Fund Land & Water Conservation Fund Historic Preservation Fund American Indian Tribes & Allottees Disbursement are made to different groups and funds based on the revenue generated by the various commodities and revenue sources U.S. Treasury receives about 59% of disbursements from revenues and royalties

29 ANALYSIS OF REVENUE FROM U.S. NATURAL RESOURCES 29 U.S. Natural Resource Revenue Disbursement to States, Fiscal Years $3.0 Average, Fiscal Years $2.5 13% $2.0 $1.5 $1.0 $0.5 3% 1% 6% 7% 6% 41% $ Fiscal Year 23% Wyoming New Mexico Utah Colorado California North Dakota Montana All Other States Two states account for majority of federal revenue disbursements to states