Raising federal royalty rates for coal, gas and oil could decrease production, increase federal revenue, according to GAO

A report released this week by the U.S. Government Accountability Office (GAO) found that raising
federal royalty rates for coal, gas and oil could slightly decrease production on federal lands increase
federal revenue by millions of dollars annually.

GAO completed the report by reviewing studies by researchers as well as organizations, including the Congressional Budget Office, the Council of Economic Advisers in the Executive Office of the President and the Bureau of Land Management. GAO also interviewed stakeholders such as officials from federal
and state agencies, industry groups, non-governmental organizations and academia.

According to the stakeholders interviewed, the extent of production decrease and revenue increase depends on several factors including market conditions and prices.

The studies reviewed by GAO concluded that raising rates would result in slight production decreases. Estimates ranged from a negligible to a 3-percent decrease resulting from increasing rates by 4 to 10 percent.

For the oil and gas industry, the studies GAO examined found that raising the rate by around 4 to 10 percent would increase federal revenue $5 million and $38 million each year. The coal studies suggested that revenue could increase by $365 million annually after 2025 or $141 million per year due to a rate increase of between 5 and 17 percent.

In fiscal year 2016, the federal government collected $2.5 million in revenue from onshore gas, coal and oil production on federal lands. Approximately $2 million of that revenue came from royalties.

Federal rates for oil and gas production are usually lower than state rates. Federal royalty rates for coal production are generally equal or higher than state rates.