Wednesday 23 June 2010

Pecuniary Oil Interest - Open Letter

Pecuniary Government Oil Interest: An Open Letter

This letter is submitted as a blog post for those in the Gulf States to take up with their Congressmen, Senators, Governors, and State Attorneys General.

“To Whom It May Concern:

According to the Deepwater Oil lease agreements posted at the Minerals Management Service, there is a mutual royalty paid to the United States government. To expedite this letter I haven’t had a chance to attempt to FOIA the exact amount of royalties paid by BP according to this agreement, however, I have looked up what I can. The low average is 12.5% royalty on all that is pumped out, an amount assessed at the wellhead by the owner of the land (, in this case the United States. Estimates of the amount of oil spilling per day range from 504,000 to 4.2 million gallons per day according to PBS (

In terms of barrels, the amount is between 12,000 and 100,000 barrels a day, this means that in the last 45 days (roughly) there’s been between 540,000 barrels (22,680,000) and 4,500,000 barrels (189,000,000 gallons)

Now with the spot price of oil running around $60 a barrel, this would mean the United States government will receive between $4,050,000 and $33,750,000 in royalties for the oil that is lost or spilled as BP has claimed it is responsible for this spill, at least this is the estimate according to this provision of a document from MMS entitled “UNITED STATES DEPARTMENT OF THE INTERIOR MINERALS MANAGEMENT SERVICE OIL AND GAS LEASE OF SUBMERGED LANDS UNDER THE OUTER CONTINENTAL SHELF LANDS ACT” and referred to as “MMS Form MMS-2005 (October 2009),” which states under “Sec. 6 Royalty on Production” :

“(a) The Lessee shall pay a royalty as shown on the face hereof in amount or value of production saved, removed, or sold from the leased area. Gas (except helium) and oil of all kinds are subject to royalty. The Lessee is liable for royalty payments on oil or gas lost or wasted from a lease site when such loss or waste is due to negligence on the part of the operator of the lease, or due to the failure to comply with any rule or regulation, order, or citation issued under the Federal Oil and Gas Royalty Management Act of 1982 or the Act. The Lessor shall determine whether production royalty shall be paid in amount or value.” (Emphasis mine, and the form is available here

This begs the question why the United States Government hasn’t spent a dime of this royalty money if the Oil Company is on the hook for paying royalties even for the oil that is sitting in the Gulf of Mexico.

As you are a representative of my state in an official capacity I ask you to please demand the government spend these reimbursable royalty funds on this clean up, not only from the royalties from this well but, from the total average royalties for all oil wells in the United States.

According to the government’s own website,, “U.S. Crude Oil Production” is “4,950,000 barrels/day” or, at 12.5% royalty, $37,125,000 a day that the United States takes in. Just taking these royalty amounts, times the last 45 days, would be $1,670,625,000 that would have been spent to help clean up the situation in the Gulf. It appears to me that this expenditure would have been a very good thing to authorize on day 1, yet was not done.

Please make sure the National Government doesn’t get off the hook for their pecuniary interest in our nation’s oil wells.

Thank you and hoping for your earnest action in regard to this matter,


Please, if you have a website do use this calculator there, to remind people how bad Obama and the United States Government have let this situation get while they party with Sir Paul McCartney. The Embed code is available here -
Thank you for reading,

Toddy Littman

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