Oil and Gas Royalties: A Comparison of the Share of Revenue	 
Received from Oil and Gas Production by the Federal Government	 
and Other Resource Owners (01-MAY-07, GAO-07-676R).		 
                                                                 
Amid rising oil and gas prices and reports of record oil industry
profits, a number of governments have taken steps to reevaluate  
and, in some cases, increase the share of oil and gas revenues	 
they receive for the rights to develop oil and gas on their lands
and waters. For example, the State of Alaska has recently passed 
new oil and gas legislation that will increase the state's share 
of revenue received from oil and gas companies operating state	 
leases. In January 2007, the Department of the Interior announced
an increase in the royalty rate for future leases granted in the 
deepwater region of the Gulf of Mexico. Companies engaged in	 
exploration and development of oil and gas resources do so under 
terms of concessions, leases, or contracts granted by governments
or other resource owners. The terms and conditions of such	 
arrangements are established by law or negotiated on a		 
case-by-case basis. One important aspect of the arrangements is  
the applicable payments from the companies to the resource	 
owners--in the United States, these include bonuses, rentals,	 
royalties, corporate income taxes, and special fees or taxes. The
precise mix and total amount of these payments, referred to as	 
the "fiscal system" varies widely across different resource	 
owners. The total revenue, as a percentage of the value of the	 
oil and natural gas produced, received by government resource	 
owners, such as U.S. federal or state governments is commonly	 
referred to as the "government take." For example, a government  
take of 50 percent means that the government receives 50 percent 
of the cash flow produced from an oil or gas field. In fiscal	 
year 2006, oil and gas companies received over $77 billion from  
the sale of oil and gas produced from federal lands and waters,  
and the Department of the Interior's Minerals Management Service 
(MMS) reported that these companies paid the federal government  
about $10 billion in oil and gas royalties. Clearly, such large  
and financially significant resources must be carefully developed
and managed so that our nation's rising energy needs are met	 
while at the same time the American people are ensured of	 
receiving a fair rate of return on publicly owned resources,	 
especially in light of the nation's daunting current and	 
long-range fiscal challenges. As requested, this report documents
the information provided to Congressional staffs in March 2007 on
the U.S. government's take and implications associated with	 
increasing royalty rates. Specifically, this report discusses (1)
the United States' government take relative to that of other	 
government resource owners and (2) the potential revenue	 
implications of raising royalty rates on federal oil and gas	 
leases going forward.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-676R					        
    ACCNO:   A70145						        
  TITLE:     Oil and Gas Royalties: A Comparison of the Share of      
Revenue Received from Oil and Gas Production by the Federal	 
Government and Other Resource Owners				 
     DATE:   05/01/2007 
  SUBJECT:   Comparative analysis				 
	     Economic analysis					 
	     Energy						 
	     Federal taxes					 
	     Gas leases 					 
	     Gas resources					 
	     Natural gas					 
	     Natural gas prices 				 
	     Oil drilling					 
	     Oil leases 					 
	     Oil resources					 
	     Petroleum industry 				 
	     Profits						 
	     Revenue sharing					 
	     Royalty payments					 
	     State governments					 

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GAO-07-676R

May 1, 2007

The Honorable Jeff Bingaman
Chairman
Committee on Energy & Natural Resources
United States Senate

The Honorable Nick J. Rahall II
Chairman
Committee on Natural Resources
House of Representatives

The Honorable Stevan Pearce
Ranking Member
Subcommittee on Energy and Mineral Resources
Committee on Natural Resources
House of Representatives

The Honorable Mary L. Landrieu
United States Senate

Subject: Oil and Gas Royalties: A Comparison of the Share of Revenue
Received from Oil and Gas Production by the Federal Government and Other
Resource Owners

Amid rising oil and gas prices and reports of record oil industry profits,
a number of governments have taken steps to reevaluate and, in some cases,
increase the share of oil and gas revenues they receive for the rights to
develop oil and gas on their lands and waters. For example, the State of
Alaska has recently passed new oil and gas legislation that will increase
the state's share of revenue received from oil and gas companies operating
state leases. In January 2007, the Department of the Interior announced an
increase in the royalty rate for future leases granted in the deepwater
region of the Gulf of Mexico. Companies engaged in exploration and
development of oil and gas resources do so under terms of concessions,
leases, or contracts granted by governments or other resource owners. The
terms and conditions of such arrangements are established by law or
negotiated on a case-by-case basis. One important aspect of the
arrangements is the applicable payments from the companies to the resource
owners--in the United States, these include bonuses, rentals, royalties,
corporate income taxes, and special fees or taxes. The precise mix and
total amount of these payments, referred to as the "fiscal system" varies
widely across different resource owners. The total revenue, as a
percentage of the value of the oil and natural gas produced, received by
government resource owners, such as U.S. federal or state governments is
commonly referred to as the "government take." For example, a government
take of 50 percent means that the government receives 50 percent of the
cash flow produced from an oil or gas field.

In fiscal year 2006, oil and gas companies received over $77 billion from
the sale of oil and gas produced from federal lands and waters, and the
Department of the Interior's Minerals Management Service (MMS) reported
that these companies paid the federal government about $10 billion in oil
and gas royalties. Clearly, such large and financially significant
resources must be carefully developed and managed so that our nation's
rising energy needs are met while at the same time the American people are
ensured of receiving a fair rate of return on publicly owned resources,
especially in light of the nation's daunting current and long-range fiscal
challenges.

As requested, this report documents the information provided to your
staffs in March 2007 on the U.S. government's take and implications
associated with increasing royalty rates. Specifically, this report
discusses (1) the United States' government take relative to that of other
government resource owners and (2) the potential revenue implications of
raising royalty rates on federal oil and gas leases going forward. To
address the government take, our work included reviewing results of
studies done by oil companies and industry consultants. We also collected
and analyzed various studies generated by MMS, the agency responsible for
collecting oil and gas royalties from federal lands and waters. In
addition, we reviewed results of studies prepared over the last 13 years
by various private and government sources on government take and
interviewed Alaskan state and private consulting firm officials. In
evaluating the study results we conducted interviews with study authors
and an industry expert to discuss the study methodologies and the
appropriate interpretation of the results. Based on these interviews and
our review of study results, we believe the general approach that these
study authors took was reasonable and that the study authors are credible.
However, we did not fully evaluate each study's methodology or the
underlying data used to make the government take estimates. Overall,
because all the studies came to similar conclusions with regard to the
relative government-take ranking of the U.S. federal government and
because such studies are used by oil and gas industry companies and
governments alike for the purposes of evaluating the relative
competitiveness of specific fiscal systems, we are confident that the
broad conclusions of the studies are valid. To address the revenue
implications of raising royalty rates, we gathered information from
reports, studies, and government documents, and drew from past GAO reports
related to oil and gas royalties. We also discussed the material in this
report with MMS officials and they made helpful suggestions about the
factors affecting the revenue implications of raising royalty rates. Our
work was done from January 2007 through March 2007 in accordance with
generally accepted government auditing standards.

In Summary

Based on results of a number of studies, the U.S. federal government
receives one of the lowest government takes in the world. Collectively,
the results of five studies presented in 2006 by various private sector
entities show that the United States receives a lower government take from
the production of oil in the Gulf of Mexico than do states--such as
Colorado, Wyoming, Texas, Oklahoma, California, and Louisiana--and many
foreign governments. Other government-take studies issued in 2006 and
prior years similarly show that the United States has consistently ranked
low in government take compared to other governments. For example, a study
completed in 2006 for MMS showed that the U.S. federal government take in
the Gulf of Mexico deepwater and shallow water was lower than 29 and 26,
respectively, of the 31 fiscal systems analyzed. In deciding where and
when to invest oil and gas development dollars, companies consider the
government take as well as other factors, including the size and
availability of the oil and gas resources in the ground; the costs of
finding and developing these resources, including labor costs and the
costs of compliance with environmental regulations; and the stability of
the fiscal system and the country in general. All else held equal, more
investment dollars will flow to regions in which the government take is
relatively low, where there are large oil and gas deposits that can be
developed at relatively low cost, and where the fiscal system and
government are deemed to be relatively more stable. Regarding the
deepwater areas of the U.S. Gulf of Mexico, the current size of the
government take, the relatively large estimated amounts of oil and gas in
the ground, and the proximity to the large U.S. market for oil and gas
make this region a favorable place to invest. However, the high costs of
operating in deepwater may deter some investment.

Increasing royalty rates on future federal oil and gas leases would likely
increase the federal government take but by less than the percentage
increase in the royalty rate because higher royalty rates would likely
reduce some taxes and other fees and may also discourage some development
and production. For example, the recently announced increase in royalty
rates from 12.5 percent to 16.67 percent on future leases sold in the
deepwater regions of the Gulf of Mexico will, according to MMS, increase
overall federal revenues but will also cause reductions in some fees and
in oil and gas production. Specifically, MMS estimates that the new
royalty rate of 16.67 percent will increase revenue by $4.5 billion over
20 years. MMS also estimates that, by 2017, this increased revenue will be
partially offset by revenue losses of $820 million over 20 years as a
result of reduced rental fees as well as a decline in production of 5
percent. A lower royalty rate can encourage oil companies to pursue oil
exploration and production and thereby provide an economic stimulus to oil
producing regions. For example, according to a MMS study issued in 2006,
as the industry expands output in the Gulf of Mexico, employment levels in
all Gulf Coast states--including Alabama, Louisiana, Mississippi, and
Texas--tend to rise to meet industry needs. As part of an energy strategy
to meet the nation's energy needs and balance the impacts of energy use on
the environment and climate, a healthy domestic oil and natural gas
industry is essential, and that means that the United States must continue
to create a market that is competitive in attracting investment in oil and
natural gas development. Such development, however, should not mean that
the American people forgo a competitive and fair rate of return for the
extraction and sale of these natural resources, especially in light of the
current and long-range fiscal challenges facing our nation. The potential
trade-offs between higher revenue collections and higher oil production
highlight the broader challenge of striking a balance between meeting the
nation's increasing energy needs and ensuring a fair rate of return for
the American people from oil production on federally leased lands and
waters.

Background

The Department of the Interior, created by the Congress in 1849, oversees
and manages the nation's publicly owned natural resources, including
parks, wildlife habitat, and crude oil and natural gas resources on over
500 million acres onshore and in the waters of the Outer Continental
Shelf. In this capacity, the Department of the Interior is authorized to
lease federal oil and gas resources and to collect the royalties
associated with their production. The Department of the Interior's Bureau
of Land Management is responsible for leasing federal oil and natural gas
resources on land, whereas, offshore, MMS has the leasing authority. To
lease lands or waters for oil and gas exploration, companies generally
must first pay the federal government a sum of money that is determined
through a competitive auction. This money is called a bonus bid. After the
lease is awarded and production begins, the companies must also pay
royalties to MMS based on a percentage of the cash value of the oil and
gas produced and sold.1 Royalty rates for onshore leases are generally 12
and a half percent whereas offshore, they range from 12 and a half percent
for water depths of 400 meters or deeper (referred to as deepwater) to 16
and two-thirds percent for water depths less than 400 meters (referred to
as shallow). However, the Secretary of the Interior recently announced
plans to raise the royalty rate to 16 and two-thirds percent for most
future leases issued in waters 400 meters or deeper. MMS also has the
option of taking a percentage of the actual oil and natural gas produced,
referred to as "taking royalties in kind," and selling this energy itself
or using it for other purposes, such as filling the nation's Strategic
Petroleum Reserve. In addition to bonus bids and royalties, companies pay
taxes on corporate profits. The sum of all these and other payments
comprises the government take. Because different governments set different
levels of taxes, fees, and royalties, the relative size of any one
component of government take generally varies across different fiscal
systems.

Study Results Indicate That the Federal Government Receives among the
Lowest Government Takes in the World

Results of five studies presented in reports or testimony to the Alaskan
state legislature in 2006 indicate that the federal government receives
one of the lowest government takes among the jurisdictions evaluated. The
hearing was held to discuss a proposed new state tax on oil company
profits. This proposal eventually was adopted and, in 2006, the State of
Alaska enacted a new oil and gas production tax law which imposed a 22.5
percent tax on oil company profits. Two of the studies presented were from
major oil companies, and three were from private consulting firms. The
five studies had differing scopes and somewhat different estimates of
government take. For example, one study focused primarily on comparing
U.S. federal, state, and Canadian fiscal systems, while other studies
focused on
international comparisons. The results of the five studies are summarized
below and in more detail in enclosure I.2

^1 Specifically, royalties are computed as a percentage of the monies
received from the sale of oil and gas, with the total federal royalty
revenue equal to the volume sold multiplied by the sales price multiplied
by the royalty rate.

           o BP (formerly British Petroleum), one of the world's largest oil
           companies. testified that the federal government's take for leases
           in the Gulf of Mexico (45 percent) was lower than 9 out of 10
           other fiscal systems presented, including Colorado, Wyoming,
           Texas, Oklahoma, California, and Louisiana (between 51 percent and
           57 percent).

           o ConocoPhillips, Alaska's number-one oil producer in 2005,
           testified that the federal government's take for leases in the
           Gulf of Mexico (43 percent) was lower than all 8 other fiscal
           systems presented, including the United Kingdom (52 percent) and
           Norway (76 percent).

           o CRA International (formerly Charles River Associates), a global
           firm specializing in business consultancy and economics, testified
           that the federal government's take in the Gulf of Mexico--both
           deepwater (42 percent) and shallow water (50 percent)--was lower
           than the 6 other fiscal systems it evaluated, including Australia
           (61 percent).

           o Daniel Johnston and Company, an independent petroleum advisory
           firm providing services to the oil and gas industry, testified
           that the federal government's take in the Gulf of Mexico for
           deepwater (between 37 and 41 percent) was 4th lowest and for
           shallow water (between 48 and 51 percent) was 8th lowest among 50
           fiscal systems it evaluated.

           o Van Meurs Corporation--a company which provides international
           consulting services in several areas including petroleum
           legislation, contracts, and negotiations--reported that the
           federal government's take in the Gulf of Mexico (40 percent) was
           the lowest among 10 fiscal systems it evaluated, including Alaska
           (53 percent) and Angola (64 percent).

It should be recognized that the studies presented in this testimony were
done before the recent increase in the royalty rate for future deepwater
leases in the Gulf of Mexico. This action will, as new leases are added to
the mix over time, cause the average government take in the Gulf of Mexico
to rise somewhat. In addition, 4 of the 5 studies compared government take
based on 11 fiscal systems or fewer. A comparison of a much larger number
of fiscal systems provides more comprehensive information. In this regard,
we found that other expanded government-take studies have been issued.
These are summarized below and more details are presented in enclosure II.

^2 The studies estimated slightly different government takes for the Gulf
of Mexico. This is partially explained by the fact that some studies
average the government take for the entire Gulf of Mexico, while others
distinguish between the shallow and deepwater regions, which have
different lease and royalty terms and therefore different government
takes. Other variation may exist as a result of changes over time that are
reflected in when the study data were collected as well as somewhat
different methodologies used by the study authors to calculate government
take.

           o A study issued in 2006 and done under contract with MMS by the
           Coastal Marine Institute of the Louisiana State University
           reported on 31 fiscal systems in 25 countries. The study showed,
           out of the 31 fiscal systems, Gulf of Mexico deepwater, at between
           38 and 42 percent, was lower than 29 other systems and Gulf of
           Mexico shallow water, at between 48 percent and 51 percent, was
           lower than 26 systems. Three other offshore fiscal systems were
           also shown. This included Trinidad & Tobago offshore with a
           government take between 48 percent and 50 percent, Australia
           offshore with a government take of between 53 percent and 56
           percent, and Egypt offshore with a government take of between 79
           percent and 82 percent. Of the 31 fiscal systems presented, Mexico
           had the lowest government take at between 30 percent and 32
           percent, and, at the other end of the spectrum, Venezuela had the
           highest government take at between 88 percent and 93 percent.

           o A second study, issued in 2002 by Wood MacKenzie, a private
           consulting firm, analyzed 61 fiscal systems within 50 countries.
           The study showed that, out of 61 fiscal systems, Gulf of Mexico
           deepwater ranked lower than 54 other systems with a federal
           government take of about 42 percent, while Alaska's government
           take was about 64 percent. Of the 61 fiscal systems analyzed,
           Cameroon had the lowest government take at about 11 percent, and
           at the other end of the spectrum, Iran had the highest government
           take at about 93 percent.

           o A third study, issued by Van Meurs Corporation in 1997, analyzed
           324 fiscal systems in 159 countries. The study showed that, out of
           324 fiscal systems, Gulf of Mexico water greater than 800 meters
           ranked lower than 298 other systems with a federal government take
           of about 41 percent and Gulf of Mexico water between 200 and 400
           meters ranked lower than 276 systems with a federal government
           take of about 47 percent. The study also indicated that
           governments tend to compete regionally and that the regional
           average government take for countries within North America was
           about 57 percent.

           o Finally, one of the first expanded, or comprehensive, studies
           was completed by Van Meurs Corporation in 1994 for the World Bank.
           That study showed that the government take from federal onshore
           lands, Gulf of Mexico deepwater, and Gulf of Mexico shallow,
           ranked lower than 194, 191, and 180 out of 226 fiscal systems in
           144 countries, territories, and joint development zones analyzed.

The last few years of high oil and gas prices and record industry profits
have been a factor in causing a number of resource owners to reevaluate
their fiscal systems. For example, and as already discussed, the State of
Alaska enacted in 2006, a new oil and gas production tax law which, among
other things, imposed a 22.5 percent tax on oil company profits. In
addition, at least five states--including New Jersey, New York,
Pennsylvania, Washington, and Wisconsin--and Alberta Province in Canada
are considering new oil and gas tax legislative proposals.

The level of government take can influence investment in oil and gas
development and production. Resource owners are competing to some extent
for finite private investment in oil and gas development, and in
considering the ideal government take, the resource owners must consider
that there may be a trade-off between the magnitude of government take and
the level of investment. From the oil and gas industry's perspective,
government take represents one of the costs of doing business. As with any
industry, if the costs in one geographic area increase, industry may
pursue locations elsewhere.

In addition to the overall government take, the mix of taxes, fees, and
royalty rates that comprise the government take may also be important in
determining the level of investment. For example, in commenting on
Alaska's then-proposed revisions to its oil and gas tax law, a BP official
testified that a fiscal system should be equitable to investors and the
government alike and should be profit-related, that is, with a tax levied
on profits not revenues. Similarly a ConocoPhillips official testified
that a balanced fiscal system is critical for future oil and gas
investment in Alaska and that Alaska must maintain its fiscal system
competitiveness on a global basis.

Further, the size of oil and gas reserves, the costs of exploration and
development, and the stability of the government and regulatory
environment play a role in companies' investment decisions. In many
regards, the United States is a desirable place to invest in oil and gas
development and production. For example, of non-OPEC countries, the United
States held almost 10 percent of oil reserves as of 2006. In addition,
including the existence of a nearby market for all that is produced, the
United States is generally considered a stable place to invest, especially
when compared to many countries, such as Venezuela and Nigeria, that have
large oil and gas reserves. For example, in Venezuela, it was reported
last year that the government had taken a series of steps to increase the
government take as well as take greater control over oil operations in
that country, and in Nigeria, it was recently reported that there have
been repeated instances of oil company employees being kidnapped or
attacked. However, much of the estimated oil reserves in the United
States, such as those in the deepwater areas of the Gulf of Mexico, and
the smaller pockets of oil remaining in mature oil fields will be more
costly to develop than oil in some other regions, and these higher costs
are a deterrent for investment. In addition, to the extent that
environmental regulations in the United States are stricter than in some
other oil producing countries, this could increase compliance costs and
necessitate to some extent a lower government take in the United States.
Further, to the extent that labor costs are a factor in determining the
profitability of oil development projects, the United States may have
higher labor costs than some other oil producing countries, and this would
also necessitate, to some extent, a lower government take.

Increasing Royalty Rates on Future Federal Oil and Gas Leases Would Likely
Increase the Federal Government Take

Increasing royalty rates on future federal oil and gas leases would likely
increase the federal government take but by less than the percentage
increase in the royalty rate itself because higher royalty rates will
likely reduce some taxes and other fees and may also discourage some
development and production compared to what it would be under lower
government take conditions. For example, because the federal government
assesses taxes on corporate profits, an increase in royalty rates would
raise oil and gas company costs, thereby reducing their profits and,
consequently, the corporate income taxes they pay. In addition, an
increase in royalty rates may reduce the amount, in fees or bonuses, oil
and gas companies are willing to pay for the rights to develop individual
leases. Because such fees or bonuses are determined competitively, this
may lead to lower government revenue. Finally, higher royalty rates may
deter some development or production of oil and gas if companies can find
more profitable investment opportunities elsewhere and for which other
factors, such as stability and the amount of oil and gas reserves are
comparable.

MMS' analysis that accompanied a recently announced increase in the
royalty rate for new federal deepwater offshore Gulf of Mexico leases
illustrates how the increase in royalty rates can be offset somewhat by
reduced fees and production. MMS estimates that the increased royalty rate
of 16.67 percent--from 12.5 percent--will increase revenue from royalty
payments by $4.5 billion over 20 years. However, MMS also recognized that
this royalty rate increase will likely cause declines in bonus and rental
revenues as well as reduce oil and gas production compared to what it
would have been under the lower royalty rate. Specifically, MMS estimated
a decline of bonus and rental revenues amounting to $820 million over 20
years and a decline in production of 5 percent, or 110 million barrels of
oil equivalent, over 20 years compared to what production would have been
at the lower rate. Nonetheless, MMS estimates that by 2017, the net
increase in total revenue will still be substantial.

In addition to revenue considerations, there are a number of other
considerations that could be considered when establishing a royalty rate
or the overall government take. These include environmental issues and
socioeconomic effects. Royalties or other fees or taxes may reduce the
amount of investment in oil and gas development and production and,
therefore, to the extent that higher royalty rates reduce oil and gas
development and production in the United States, could be used as a policy
tool to reduce the domestic environmental impacts of oil and gas
development. Regarding socioeconomic effects of oil and gas development
and production, a 2006 study done under contract for MMS noted that as the
oil and gas industry expands output in the Gulf of Mexico, employment
levels in all Gulf Coast states--including Alabama, Louisiana,
Mississippi, and Texas--tend to rise to meet industry needs.3

As agreed with your offices, unless you publicly announce the contents of
this report earlier, we plan no further distribution until 30 days from
the date of this report. At that time, we will send copies to appropriate
congressional committees, the Secretary of the Interior, the Director of
MMS, the Director of the Office of Management and Budget, and other
interested parties. We will also make copies available to others upon
request. In addition, the report will be available at no charge on GAO's
Web site at http://www.gao.gov .

^3 Minerals Management Service, Economic Effects of Petroleum Prices and
Production in the Gulf of Mexico OCS on the U.S. Gulf Coast Economy, MMS
2006-063 (October 2006).

If you or your staff have any questions or comments about this report,
please contact me at (202) 512-3841 or [email protected] . Contact
points for our Offices of Congressional Relations and Public Affairs may
be found on the last page of this report. GAO staff who made contributions
to this report include Frank Rusco, Assistant Director; Robert Baney; Dan
Novillo; Dawn Shorey; Barbara Timmerman; and Maria Vargas.

Mark E. Gaffigan
Acting Director, Natural Resources
and Environment

Enclosures

Enclosure I: Government Take Summaries Presented in 2006 to the Alaska
State Legislature

FISCAL SYSTEM GOVERNMENT TAKE (%)a
                 PRESENTERS   
                 BP (formerly Conoco    CRA            Daniel    Van Meurs
                 British      Phillipsb Internationalc Johnston  Corporatione
                 Petroleum)                            and           
                                                       Companyd      
North                                                                      
America:                                                                   
Canada -      39                                                           
Alberta 1                                                                  
(before                                                                    
project                                                                    
becomes                                                                    
profitable)                                                                
U S Outer                                                37-41             
Continental                                                                
Shelf (OCS)                                                                
deepwater                                                                  
U S Gulf of                                  42                            
Mexico (GOM)                                                               
deepwater                                                                  
U S GOM                                      50                            
shallow water                                                              
U S GOM Total 45                43                                40       
US OCS                                                   48-51             
shallow water                                                              
Colorado      51                                                           
Canada -                                                          50       
Alberta - Oil                                                              
Sands                                                                      
Canada Total                                 51                            
Wyoming       52                                                           
Texas         53                                                           
Oklahoma      53                                                           
California    53                                                           
Canada -                        58                                         
Artic                                                                      
Canada -      54                                                           
Alberta 2                                                                  
(after                                                                     
project                                                                    
becomes                                                                    
profitable)                                                                
Alaska        56/61             63/68        53/63                53/56    
(Current                                                                   
/Proposed)                                                                 
Louisiana     57                                                           
Countries                                                                  
Elsewhere:                                                                 
Argentina                                                45-48             
United                          52           52          30-32    50       
Kingdom                                                                    
Bolivia                                                  55-58             
Ecuador                                                  56-61             
Australia                                    61          57-59             
Peru                                                     63-65             
Guatemala                                                63-68             
Colombia                                                 68-70             
Angola                          73                       66-71    64       
Russia -                                                 69-72    70       
Sakhalin                                                                   
Azerbaijan                      75                       68-72    54       
Norway                          76           74          73-76    77       
Nigeria                         77                                52       
Venezuela                                                89-91             

Source: GAO analysis; data to the Alaska State Legislature, 2006.

Note: The United States' government take from oil production in the Gulf
of Mexico and the Outer Continental Shelf is bolded in the table.

a Government take is the total percent of revenue taken from production,
regardless of whether a tax, a royalty, a bonus, or some other method of
taking revenue.

b The information presented by ConocoPhillips was taken from a 2004 study
by Wood Mackenzie "Global Oil and Gas Risk and Reward Study."
ConocoPhillips presented its government-take information using a plotting
graph but did not assign a specific value to each point that was plotted.
We estimated the government take for each point based on where that point
appeared in the graph.

c CRA International is a global firm specializing in business consulting
and economics. CRA International presented its government take information
using a plotting graph but did not assign a specific value to each point
that was plotted. We estimated the government take for each point based on
where that point appeared on the graph.

d Daniel Johnston and Company is an independent international petroleum
advisory firm providing services to the exploration and development sector
of the oil and gas industry. Percentages provided by this company are
based on discounted and undiscounted dollars. This company presented its
government-take information using a bar graph but did not assign a
specific value to each bar shown. We estimated the government take for
each bar based on the length of that bar on the graph.

e Van Meurs Corporation provides international consulting services in
several areas including petroleum legislation, contracts, and
negotiations.

Enclosure II: Three Expanded Studies on Government Take

Fiscal System             Government Take (%)
                             1997 Private      2002 Private    2006 MMS 
                             consulting firm   consulting firm studyc   
                             studya            studyb                   
Cameroon                                                    10.86          
Ireland                                                     19.92          
Ireland - frontier terms  25.10                                            
Mexico                                                               30-32 
United Kingdom - general  33.40                                            
Moldova                   34.30                                            
Kazakhstan - Oman Oil Co. 35.10                                            
Canada (East Coast)                                         35.17          
Pakistan - possible new   37.00                                            
deepwater terms                                                            
New Zealand                                                 37.51          
U. S. (Deepwater)                                                    38-42 
Falkland Islands          40.20                                            
Argentina - general       40.50                                            
United Kingdom ( shallow                                    40.77          
water)                                                                     
U. S. (deepwater/greater  41.20                                            
than 800 meters)                                                           
Netherlands offshore                                        41.92          
U. S. (Gulf of Mexico                                       42.10          
deepwater)                                                                 
Italy                                                       42.62          
China (offshore)                                            42.81          
Italy (offshore)          43.00                                            
United Kingdom - South                                      43.54          
Gas Basin                                                                  
Poland                    44.60                                            
Pakistan                                                    45.46          
Australia (offshore)                                        45.51          
Philippines                                                 46.12          
Argentina                                                   46.93          
Argentina                                                            47-49 
Denmark                                                     47,20          
Brazil (shelf)                                              47.88          
Trinidad & Tobago                                                    48-50 
(offshore)                                                                 
U. S. (shallow water)                                                48-51 
U. S. (shallow water/less 49.12                                            
than 200 meters)                                                           
Peru (offshore Block      49.40                                            
Z-29)                                                                      
Venezuela                                                   49.56          
Congo (Brazzaville)                                         50.57          
Thailand                                                    50.65          
Kazakhstan                                                  51.88          
U. S. - Alaska (onshore)  52.30                                            
Papua New Guinea                                            52.27          
Australia (offshore)                                                 53-56 
Myanmar                                                     54.00          
Philippines (deepwater)   54.40                                            
Cote d' Ivoire                                              55.34          
Chad                      55.40                                            
Bolivia                                                     55.71          
Malaysia-Thailand                                           56.21          
Canada - Newfoundland     56.70                                            
(onshore)                                                                  
Colombia                                                    57.12          
Canada - Alberta oil      57.40                                            
sands                                                                      
Ecuador                                                     57.75          
Ecuador                                                              58-60 
Peru                                                                 58-62 
Ecuador - Triton contract 58.80                                            
Pakistan - Zone 3         58.90                                            
U. S. - Texas (onshore)   59.00                                            
Equatorial Guinea                                           59.69          
Angola (deepwater)                                          59.93          
Brazil (deepwater)                                          60.19          
Bolivia - traditional     60.20                                            
India                                                                61-69 
Bangladesh                                                  61.18          
Australia (offshore)      61.20                                            
Azerbaijan                                                  61.54          
Netherlands (onshore)                                       61.67          
Trinidad & Tobago                                                    62-66 
(onshore)                                                                  
Australia (onshore)                                                  63-66 
Tunisia                                                     63.07          
Egypt - Mediterranean     63.60                                            
West Delta Deep                                                            
Timor Gap                                                   63.94          
Alaska                                                      64.24          
Joint Development Area    64.30                                            
(Thailand - Malaysia)                                                      
Nigeria (deepwater)                                         64.62          
Peru - Camisea            65.50                                            
Canada - Alberta - 3rd    66.70                                            
Tier No Tax Credit                                                         
India                                                       66.82          
Republic of Congo                                                    67-69 
Papua New Guinea                                                     67-76 
Malaysia (deepwater)      67.40                                            
Turkmenistan                                                68.06          
Trinidad & Tobago         68.20                                            
(onshore)                                                                  
Vietnam                                                     68.55          
Trinidad & Tobago                                           69.00          
(offshore)                                                                 
Indonesia (East)                                                     69-71 
Malaysia (frontier)                                                  69-74 
Thailand                                                             69-74 
Gabon                                                                69-76 
Peru - Murphy contract    69.60                                            
Indonesia (offshore)                                        71.01          
Algeria                                                     71.72          
Gabon (offshore)                                            71.81          
Timor Gap - ZOCA          72.00                                            
China                                                                72-77 
Yemen                                                                72-79 
Egypt (offshore)                                            73.04          
Gabon (onshore)                                             73.38          
Brunei                                                      73.90          
China (offshore)          74.10                                            
Angola (shelf)                                              74.11          
Azerbaijan - AIOC         74.20                                            
Egypt (onshore)                                             74.27          
Russia - Komi Republic    74.30                                            
Yemen - Nimir - revised   74.60                                            
Thailand - Gulf of        74.70                                            
Thailand                                                                   
Norway                                                      74.74          
Peru                                                        75.04          
Yemen                                                       75.36          
Myanmar - Amoco contract  76.30                                            
Sudan                                                       76.96          
Egypt (onshore contract - 78.30                                            
Marathon)                                                                  
Peru - Block 52 (Chevron) 78.70                                            
Libya                                                       78.73          
Colombia                                                             79-82 
Egypt (offshore)                                                     79-82 
Vietnam                                                              79-82 
Tunisia                                                              79-85 
Qatar                                                       79.09          
Papua New Guinea          79.80                                            
Indonesia (onshore)                                         80.13          
Gabon                     80.40                                            
Angola                                                               81-88 
Brunei (offshore > 10     81.20                                            
miles)                                                                     
Malaysia                                                    81.24          
Russia - Sakhalin 2       81.40                                            
Brunei                                                               82-84 
Kazakhstan                                                           83-88 
Syria                                                                83-87 
Oman                                                        83.19          
Yemen (Norsk Hydro        83.90                                            
contract)                                                                  
Norway - North Sea        84.20                                            
Syria (Model PSC)         84.50                                            
Egypt (onshore)                                                      85-90 
Indonesia (pre-tertiary)  85.00                                            
Nigeria- Niger Delta      85.00                                            
Nigeria (onshore)                                           87.21          
Indonesia (West)                                                     87-89 
Nigeria (shelf)                                             87.44          
Kazakhstan (Tengiz JV)    87.40                                            
Malaysia (onshore)                                                   88-91 
Venezuela                                                            88-93 
Colombia                  89.60                                            
Iran                                                        93.26          
Venezuela- G' Piche Block 95.10                                            

Source: GAO analysis; government take data from Internet.

Note: Fiscal systems are listed in numerical order from lowest to highest
for each study. In some cases, certain fiscal systems are listed more than
once in this table to show their relative ranking in each study. The
government take for U.S. deepwater and shallow water in each study is
bolded in the table.

a Analyzed 324 fiscal systems in 159 countries. Fifty fiscal systems are
presented in this table. Information about this study was obtained from an
article appearing in the May 26, 1997 issue of the Oil and Gas Journal.

b Information about this study was obtained from a May 2004 presentation
by the Alaska Oil and Gas Association.

c Capital Investment Decisionmaking and Trends: Implications on Petroleum
Resource Development in the U. S. Gulf of Mexico, MMS 2006-064 (October
2006). The study contained government-take information on 31 fiscal
systems in 25 countries. The information in this study about government
take was excerpted from a 1994 private consulting firm report.

(360819)

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