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Western states uniting over ‘unlawful’ cuts to energy royalties

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Greg Campbell Contributor
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Western states are protesting the Obama administration’s use of sequestration as an excuse to cut mineral rights royalties to energy producing states by 5.1 percent, with one multi-state coalition calling it outright “theft” and the Colorado attorney general claiming that the plan may be “unlawful.”

The cuts will cost Colorado about $8.3 million, but critics say it’s nothing but a cynical political ploy to make ordinary Americans feel the pain of sequestration. Total cuts to all the affected states amount to $110 million.

States receive half of the leasing revenue from energy companies working on federal lands within their borders, but the federal government collects all the revenue and then distributes it to the states.

Because the feds operate only as a pass-through service for the royalties, they shouldn’t be subject to spending cuts because there’s no federal spending involved, argues Sean Paige, of Americans for Prosperity-Colorado.

“These aren’t gifts from the Treasury, which can be withheld at Washington’s discretion,” Paige wrote in a letter to Suthers, according to the Denver Post. “But royalty payments directly derived from energy development activities that occur on federal lands in Colorado, part of a contractual arrangement with Washington dating back to the Mineral Land Leasing Act of 1920.”

Suthers apparently agrees, The Washington Times reports.

“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,” Suthers wrote in a letter to AFP-Colorado.

The cuts, which affect payments from March through July and may be extended, have presented a rare opportunity for politicians from both parties to unite in opposition to Washington.

The bipartisan Western Governor’s Associated, chaired by Democratic Colorado Gov. John Hickenlooper, sent a letter to Agriculture Secretary Tom Vilsack protesting the cuts in May.

The Denver Post, in a fiery editorial that called the plan a “devious” way of trying to make ordinary Americans feel the pain of spending cuts, said the governors are still waiting for a reply.

Congress, meanwhile, is not waiting. Lawmakers are hammering out bipartisan legislation that would change the way royalty payments are handled, so that leaseholders would pay states directly rather than route payments through the feds.

The Energy Producing States Coalition, which includes legislators from 13 states, flatly called the plan to cut royalties to the states “theft.”

“This federal budgetary slight-of-hand is designed solely to shift additional financial burdens on States by reducing their guaranteed share of mineral royalties so the federal government can continue to feed its spending addiction,” the group said in a statement. “The mineral royalties will still be paid to the federal government, but withheld to the states.”

“That’s not sequestration. It’s called theft.”

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