Interior Department Asks Tribes for Input on New Indian Oil Valuation Committee

On January 28, 2011, Interior Secretary Ken Salazar announced that the Department of the Interior (DOI) will begin a process to revamp the way the federal government calculates royalties paid to American Indian tribes for oil produced on tribal lands. The move will likely mean that tribes will receive greater royalty payments. Secretary Salazar announced the formation of an Indian Oil Valuation Negotiated Rulemaking Committee to propose revised oil valuation regulations and is asking for nominations for people to serve on the Committee. Nominations are due by March 2, 2011. The Federal Register notice is attached.

Tribes have sought for years to revise the rules by which the Office of Natural Resources Revenue (ONRR, formerly the Minerals Management Service (MMS)) calculates values for oil produced on Indian lands. The oil values, in turn, set royalty rates. Current rules, dating from 1988, provide for oil valuation methods based on industry-posted prices. In the 1990s, the MMS began moving away from the use of industry-posted prices which the MMS believed significantly understated market value.

As explained in the Federal Register notice, ONRR seeks nominations for the rulemaking committee to represent all interests that could be affected by the rule. ONRR has identified the interests that are likely to be significantly affected as “oil and gas companies who produce oil and pay royalties on Indian leases, and Indian tribes and individual Indian mineral owners who receive royalties from oil produced from Indian leases located on their lands.” The ONRR prefers to limit the size of the rulemaking committee to 15 individuals but it can accommodate up to 25 individuals.

The formation of the negotiated rulemaking committee offers tribes, tribal organizations, and tribal advocates a major opportunity to reshape the royalty structure and increase economic development opportunities on Indian lands.

If we may be of assistance regarding your interest in participating on the rulemaking committee, please contact us at the information below.