Interior to Return $110 Million Withheld from States Over Sequester Royalty Dispute
The Department of Interior notified dozens of state treasurers on Monday that refunds totaling $110 million would be coming back to their coffers after a reversal of the Administration's decision to withhold royalty payments required by the Mineral Leasing Act (MLA). Last spring, a decision was made by Interior and the Office of Management and Budget to treat MLA payments owed to 34 impacted states as a “federal expenditure” subject to the parameters of the Sequester and the 2011 Budget Control Act. That decision received significant bipartisan opposition from many in Congress and the Western Governors Association.
The Mineral Leasing Act entitles states to receive 48 percent of the royalties, rentals, and other receipts collected by the Bureau of Land Management from all mineral activities on federal lands within their borders.These royalties are used by states to fund necessary items, such as public school systems, community colleges, emergency response activities and basic infrastructure projects.
In February 2013, states were informed by the Department of Interior that MLA royalties would be cut by 5.1 percent as part of the Administration's compliance with mandatory spending cuts under the Sequester. This decision to treat royalty payments disbursed by the Treasury as a "federal expenditure" drew a strong response from Western Governors saying, "The revenues owed to the mineral-producing states under the MLA are not a gift, a hand-out, or an entitlement but rather are the result of a compromise reached in 1920 that compensation is due to the states for mineral development within their boundaries." The Conference of Western Attorneys General noted, "the fact that the royalty payments make a stop in the federal treasury before being returned to the states does not convert the royalties into federal money or give the federal government any discretion to decide whether or how much money to return to the states." They went on to say, "The failure of the federal government to exempt MLA payments to states from sequestration is arbitrary and capricious ... Reducing the federal budget deficit is a laudable and necessary goal; but it cannot be achieved on the backs of states and with disregard for the principles of federalism."