Revenue sharing agreements in UNCLOS are not a reason to reject the treaty
Opponents of UNCLOS often point to the royalty payments required under Article 82 of the convention as a reason to reject ratifcation. However, on closer examination many of the criticisms of the revenue sharing agreeements do not hold up. The actual amount the U.S. would have to pay pales in comparison to the revenues that would be generated, a significant reason why industry represenatives have consistently been in favor of UNCLOS. Additionally, the concern that royalty payments would go towards anti-U.S. states and non-state actors could be mitigated if the U.S. were a full member of the treaty.
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Some opponents of ratification have objected to the Convention’s provisions concerning revenue sharing of proceeds from the outer continental shelf. Under the Convention, no payments are owed for the first five years of production (which are typically the most productive). Beginning in year six, payments equal to 1 percent of the value of production at the site, increasing 1 percent each year to a maximum of 7 percent, are owed to the International Seabed Authority.
Significantly, the U.S. oil and gas industry, which would likely make these payments, does not oppose the Convention’s revenue sharing provisions. After noting “the significant resource potential of the broad U.S. continental shelf,’’ Paul Kelly of Rowan Industries, representing the American Petroleum Institute and other major industry groups, told the Senate Foreign Relations Committee in October 2003 that “on balance the package contained in the Convention, including the modest revenue sharing provision, clearly serves U.S. interests.’’
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Every financial concern raised against UNCLOS has been expressly rebuked by US industry; in fact, nearly every major US business possessing maritime interests has publicly and unequivocally supported US accession to the Convention.101 For example, the American Petroleum Institute (API) has repeatedly asserted that its members will not risk investing the billions of dollars required to drill in the US ECS without the legal certainty UNCLOS offers.102 Consequently, as long as the US remains outside the UNCLOS framework, it cannot receive any of the royalties it would otherwise be entitled to from the petroleum industry were ECS drilling to commence. As one UNCLOS proponent expressed, “it’s better to have 93% of something, than 100% of nothing.”103 Therefore, as it stands today, it would be more accurate to characterize UNCLOS, as it relates to the costs to comply, as a squandered source of revenue, as opposed to a financial liability.