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.
Quicktabs: Arguments
Regarding the third concern, the taxation on resource extraction in exclusive economic zones amounts to just over 2 percent on average, a price that mining and hydrocarbon companies have signaled they are willing to pay as the world’s energy markets hunger for new resources and prices of commodities climb. As for revenue redistribution, opponents too often overlook the fact that following renegotiation of the Law of the Sea, the United States is guaranteed the only permanent veto on how funds are distributed. It is also exempt from any future amendments to the treaty without Senate approval. In other words, the United States would enjoy a position of unequaled privilege, not unfair treatment, within UNCLOS.
Granted, as UNCLOS critics are quick to point out, access to the ECS under UNCLOS is contingent upon payment of royalties to the Interna- tional Seabed Authority (ISBA) for oil and gas development beyond 200 nautical miles (nm).26 However, the royalty framework is relatively insignifi- cant compared to the fee-sharing arrangements for overseas oil and gas development and the enormous economic benefits anticipated from off- shore resource development. Revenue sharing does not begin until the 6th year of production of a particular well or site, starts at 1% of the value of production and increases 1% per year. By the 12th year and remaining years thereafter, the royalty is 7% of the value of production, paid either in kind or in dollars.27 During the 1970s, these revenue sharing provisions were negotiated in consultation with the U.S. oil and gas industry.