Feds’ royalty grab must be overturned
The economic devastation predicted to accompany the federal budget sequestration that took effect early this year has, for the most part, been far less severe than predicted.
But one set of funds under sequester will have a severe impact on state and local budgets throughout the West. What’s worse, the federal government has no authority to withhold the money — at least according to state attorneys general from 10 Western states, including Colorado.
It is exactly the sort of action that makes so many people both furious and distrustful of the federal government.
The money in question is primarily Mineral Leasing Act funds, money received by the federal government for leasing of oil, gas, coal and other minerals on federal lands within a state. The federal government keeps 52 percent of that money, and 48 percent is delivered to the state where the leasing took place.
In Colorado, that has amounted to something north of $100 million a year in recent years, depending on the amount of mineral activity. One year it topped $200 million. And the money doesn’t go just to the state. Under a complicated formula, portions of it also go to city and county governments.
Back in February, the U.S. Department of Interior sent a letter to governors in Western states, informing them the funds would not be forthcoming due to the sequestration.
The Western Governors’ Association then requested federal authorities provide justification for withholding the money, which finally came in late July. The Department of Interior said the mineral royalties are a “federal expenditure.”
In an Aug. 2 letter to President Barack Obama, Secretary of Interior Sally Jewell and others, the attorneys general from around the West said that explanation is “wholly unacceptable” and “represents a profoundly flawed understanding of the relationship between our governments.”
“The revenues owed to the mineral-producing states under the MLA are not a gift, a hand-out or an entitlement,” the attorneys general added, “but rather are the result of a compromise reached in 1920 that compensation is due to states for mineral development within their boundaries.”
To date, the Interior Department and the White House haven’t responded to the attorneys general letter.
Colorado Attorney General John Suthers said that rather than a federal expenditure, this is a pass-through of lease funds the federal agency collects and then passes on to the states.
It’s easy to be a noisy onlooker, shouting from the sidelines, “Cut federal spending,” then hollering just as vehemently, “But don’t cut my piece of the federal pie.” But that isn’t the case here. This isn’t a piece of pork from the highway fund or Interior budget that states are trying to glom onto.
The mineral leasing money isn’t a part of the federal pie. It is money paid by the mineral extraction companies for the opportunity to lease minerals within a state’s boundaries. The federal government just happens to collect the states’ share of the leasing funds, along with its own.
If the Interior Department doesn’t change its position regarding these funds, legal or congressional action may be required to ensure Western states the money they are due.