Cut in mineral royalties to Western states tied to sequester

Administration refuses to release back payments

DENVER - Western lawmakers are waging a bipartisan revolt against the Obama administration’s decision to cut mineral royalties to the states as a result of the sequester, but so far the administration isn’t budging.

Legislation is pending in the House and Senate that would allow the states to collect their royalty checks without having them funneled through the federal government, while Western governors are pushing the administration to release the $110 million in payments owed to as many as 26 states.

No lawsuit has been filed, but Colorado Attorney General John Suthers said in a letter to Americans for Prosperity-Colorado released Thursday that he believes the administration’s action is illegal.

“Given the lack of articulated authority to sequester funds, I believe the sequester is unlawful, especially as it relates to royalty payments due to states under the federal Mineral Leasing Act,” Mr. Suthers says in the letter.

The Interior Department’s Office of Natural Resources Revenue notified states in March that it would withhold payments from March through July, and possibly August and September, saying the move was required by the 5.1 percent across-the-board sequestration cuts.

Under the Minerals Leasing Act, states receive 50 percent of revenues resulting from the leasing of mineral resources within their borders on federal public domain lands. The agency has cut the payments by 5.1 percent, but critics argue that the royalties shouldn’t be subject to the sequester.

“They’re interpreting the federal mineral payments as an expense, instead of a pass-through, which is what it is,” said Bo Ollison, senior policy director for the Consumer Energy Alliance in Houston.

While 26 of the 50 states receive mineral royalties, the sequestration cuts have hit hardest in New Mexico and Wyoming, low-population Western states that depend heavily on mining revenue, as well as Colorado, Montana, Idaho and California, Mr. Ollison said.

The Energy Producing States Coalition and the Western Governors’ Association fired off letters in May to the administration seeking the return of the royalty payments, but they’re still waiting for a response.

“Any comparison between a mineral receipt transfer and an appropriated expenditure is fundamentally flawed,” said the May 14 letter from the WGA signed by Utah Gov. Gary Herbert and Colorado Gov. John Hickenlooper.

“The federal government has no option except to transfer these pass-through funds to qualifying states. The federal government may not make payment of these funds to any other program or entity. Thus, [the Department of the Interior’s] action raises a number of legal and policy questions for Western Governors,” they wrote.

Leading the congressional charge are the New Mexico and Wyoming delegations as sponsors of the States Mineral Revenue Protection Act, which would give states the option of eliminating the federal government as the middleman for royalty revenues.

Rep. Ben Ray Lujan, New Mexico Democrat, said his state stands to lose $25 million in payments. He said the legislation also would allow states to stop paying the current 2 percent fee charged by the federal government for forwarding the royalty payments.

“The state’s share of these funds is just that — the state’s share — and should not be withheld by the federal government due to sequestration,” said Mr. Lujan in a statement.

Rep. Cynthia M. Lummis, Wyoming Republican, blasted the federal government, saying in a statement that “the middleman cannot be trusted to make the payments.”

“This spring my home state of Wyoming saw $53 million in royalty funds disappear right before their eyes,” Ms. Lummis said. “This is just another example of what has become a bad habit in Washington: raiding Wyoming’s coffers to cover federal spending.”

Wyoming Gov. Matt Mead had explored the possibility of filing a lawsuit, but he decided against it after seeking the advice of the state’s attorney general, spokesman Renny MacKay said.

“Everybody’s looking at every possibility on this and will continue to do so,” Mr. MacKay said.

Sean Paige, deputy director of AFP-Colorado, said he was hopeful that other states would pursue legal action.

“Now, our attorney general is on record denouncing the administration’s royalty ripoff,” said Mr. Paige in a Thursday statement. “It’s timefor action. We have to slap the cuffs on these guys and return the funding to its rightful owners.”

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