Federal Revenue from Energy Hits 12-Year Low in 2016 at only $6 Billion

Lower oil prices see federal revenues from oil and gas operations at their lowest point since at least 2004

Federal revenue from energy production on federal and American Indian lands fell for a second consecutive year to the lowest point since at least 2004, according to the Energy Information Administration (EIA). For fiscal year (FY) 2016, the U.S. government collected nearly $6 billion in revenues from royalties, rental costs, and other fees associated with the production of coal, oil, natural gas, and hydrocarbon gas liquids, as well as renewables.

Revenue generated from energy production exceed $14 billion in FY2013 driven largely by the growth in offshore and onshore revenue during the period of high oil prices that proceed the oil price crash at the end of 2014.

In FY2016, royalties accounted for 86% ($5.1 billion) of total revenue from energy activities, according to the EIA. Royalties are based on the amount of a resource produced and its value. As prices change, royalty revenue also fluctuates.

Crude oil is the primary source of federal revenue from energy production

From FY2010 to FY2016, royalties from crude oil accounted for 55% of the total revenue collected by the U.S. government from activities related to energy production on federal lands. The drop in oil prices in late 2014 has meant that revenue from crude oil has also shrunk despite growing oil production. Natural gas, including hydrocarbon gas liquids in the raw natural gas stream, made up an additional 20% of total revenue since 2010, and decreases in the price of natural gas since early 2014 also affecting total royalties. Royalties from coal production contributed an average of 7% of total revenues over this period, the EIA said.

Most of the remaining revenue came from rent on leases of public land (paid annually), fees, and bonuses (a one-time payment paid upon winning a bid), mostly from production of fossil fuels. Royalties and rents from other resources, which includes renewables like geothermal generation and wind energy, were about 1% of total revenue from 2010 through 2016.

Federal royalties collected from energy production are distributed among federal, state, and other funds. In FY2016, the U.S. Treasury was the largest recipient, receiving $2.4 billion. States also receive a share from onshore production and offshore production based on the activities occurring in each state. Thirty-seven states collectively received almost $1.32 billion in revenue sharing in 2016. More than half a billion dollars ($560 million) was disbursed to 34 federally recognized American Indian tribes and more than 35,000 individual Indian mineral owners.

The remaining $2.8 billion went to two dedicated funds: $1.01 billion to the Reclamation Fund, which is used for water management and efficiency programs for the benefit of 17 western states, and $884 million to the Land and Water Conservation Fund, which provides grants to governments at all levels for easements, land acquisition, and overall conservation. The Historic Preservation Fund, which had received $150 million annually, expired at the end of FY2015.

Show your support

Clapping shows how much you appreciated Oil & Gas 360®’s story.