Companies pay a wide range of fees, rates, and taxes to extract natural resources in the U.S. The amounts differ depending on the ownership of the resources. We'll cover some of the major types of payments companies make here. They are usually called ‘revenue’ because they represent revenue to the American public.
Payments to extract natural resources from federal land and waters
When companies extract natural resources on federal onshore lands and the Outer Continental Shelf, they pay revenue to the Department of the Interior (DOI).
In general, companies pay bonuses, rents, royalties, or fees and penalties (if incurred) to ONRR, and in some cases bonuses and rents to the Bureau of Land Management. Royalties, a percentage of the sales value of extracted resources, make up most of the revenue paid to DOI.
Lease holders also pay different fees to the Bureau of Land Management, Bureau of Safety and Environmental Enforcement, and Bureau of Ocean Energy Management, often to reimburse the federal government for costs associated with awarding, administering, and enforcing leases. For extracting locatable hardrock minerals on federal lands, companies pay fees, but not royalties under the Mining Law of 1872.
Revenue streams and rates
Oil and gas
|Onshore||Bonus||$1.50 annual rent per acre for the first 5 years, $2 annual rent per acre thereafter||12.5% of production value in royalties|
|Offshore||Bonus||Water depth 0–200m: Years 1–5 rent is $7/acre, year 6 rent is $14/acre, year 7 rent is $21/acre, year 8+ rent is $28/acre
Water depth 200–400m: Years 1–5 rent is $11/acre, year 6 rent is $22/acre, year 7 rent is $33/acre, year 8+ rent is $44/acre
Water depth 400+: Years 1–5 rent is $11/acre, years 6+ rent is $16/acre
|12.5% for leases located in water depths less than 200 meters
18.75% for leases located in water depths of 200 meters and deeper
|Surface||Bonus||$3 annual rent per acre||12.5% of production value in royalties
$0.28 per ton Abandoned Mine Land Fee
|Sub-surface||Bonus||$3 annual rent per acre||8% of production value in royalties
$0.12 per ton Abandoned Mine Land Fee
|Public domain lands||$1 per acre||$20 processing fee
$37 location fee
$155 initial maintenance fee
$155 annual maintenance fee for the assessment year in which the claim/site was located
|Acquired lands||$1,000 minimum bond for prospecting permits
$5,000 minimum bond for leases
|$0.50 per acre or fraction of an acre||Royalty rates are exempt from minimums and determined on an individual basis by the authorized leasing officers.|
Solar and wind energy
|Onshore (solar and wind)||$15 per acre application filing fee (outside designated leasing areas)||Rent determined by number of acres multiplied by zone rate
Review the details
|Solar megawatt capacity fees vary by technology, ranging from $2,863 to $4,294
$5,010 megawatt capacity fee for wind
Review the details
|Offshore (wind)||Bonus (competitive lease)
$0.25 per acre for acquisition fee (uncompetitive lease)
|$3 annual rent per acre||2% of anticipated value of wind energy produced in operating fee*|
* Unless waived or otherwise specified
$115 nomination fee and $0.12 per acre
$165 application fee
|$2 per acre for the first year
$3 annual rent per acre for years 2–10
$5 annual rent per acre after 10 years
|Direct-use fees for energy needs other than the commercial production or generation of electricity||Electricity sales: 1.75% of gross proceeds for 10 years, then 3.5%
Arm’s length sales: 10% of gross proceeds from contract multiplied by lease royalty rate
|Noncompetitive leasing||$415 application fee||$1 annual rent per acre for 10 years
$5 annual rent per acre thereafter
Payments to extract natural resources from any land or water in the U.S.
Corporate income taxes
Corporations operating in the extractive industries pay taxes to the IRS on their income. These companies pay federal corporate income taxes regardless of whether they extract natural resources from federal, state, or privately held lands, so long as they have a liability. These companies also pay taxes on income from extracting natural resources and processing them into other products and commodities. There are different types of companies operating in these industries, with different ownership structures, and as a result, they are treated as different taxpayers:
- C-corporations with many shareholders who own the company; these companies pays corporate income taxes to the IRS.
- S-corporations with 100 shareholders or less who own the company; shareholders pay personal income taxes to the IRS.
- Partnerships where two or more members own the business; members individually pay income taxes to the IRS.
- Sole proprietorships with one individual owner; the individual owner pays personal income tax to the IRS.
Other taxes and fees
In the U.S., coal producers must pay a federal coal excise tax when they mine coal (a producer is any person or entity that owns the coal after it’s mined from the ground). Producers pay the tax when the coal is first sold or used. The tax does not apply to lignite or to coal mined in the U.S. for export.
The Abandoned Mine Land (AML) Reclamation Program uses fees paid by present-day coal mining companies to reclaim coal mines abandoned before 1977.
Revenue policy provisions
While royalty rates can reach as high as 18.75%, and the federal corporate income tax rate can reach as high as 21% depending on company income, companies may pay less. Revenue policy provisions, including royalty relief and tax expenditures, can result in smaller revenue and tax payments to the federal government to promote other policy goals.
To create incentives for companies to produce additional oil and gas on certain leases on the Outer Continental Shelf where extraction is anticipated to be unprofitable, the federal government may grant some lease holders royalty relief. Royalty relief means that these lease holders do not have to pay royalties on some amount of production, or they pay a smaller percentage of royalties, for the oil and gas they extract. There are four situations in which a lease holder may gain royalty relief:
- Leases in deep waters with depths greater than 200 meters in the Gulf of Mexico. (This type of relief has not been offered for several years, though existing leases do include it currently.)
- Leases in shallow waters with depths under 400 meters for deep gas production
- Leases toward the end of their lives in which halving royalties would encourage additional production
- Special cases in which continued production under existing terms is projected to be unprofitable
In some situations, if oil and gas prices rise above certain thresholds, lease holders that previously gained royalty relief must start paying royalties at the regular rate again.
Tax expenditures are defined in the law as “revenue losses attributable to provisions of the federal tax laws which allow a special exclusion, exemption, or deduction from gross income or which provide a special credit, a preferential rate of tax, or a deferral of tax liability.” These exceptions may be viewed as alternatives to other policy instruments, such as spending or regulatory programs.
The Treasury estimates the total dollar amount of each tax expenditure in a given year and publishes a report of these estimates.
After a payment, what happens to the revenue?
Federal budget process
Once revenue is collected by the federal government, it passes through a series of budgetary gateways before ultimately funding public services and community development. These gateways are described below, and you can explore disbursement data here.