Modest revenue sharing system in UNCLOS will not pose any burden on extracting industries and is in U.S. best interests
[ Page 3 ]
The Convention provides a reasonable compromise between the vast majority of nations whose continental margins are less than 200 miles and those few, including the U.S., whose continental shelf extends beyond 200 miles, with a modest obligation to share revenues from successful minerals development seaward of 200 miles. Payment begins in year six of production at the rate of one percent and is structured to increase at the rate of one percent per year to a maximum of seven percent. Our understanding is that this royalty should not result in any additional cost to industry. Considering the significant resource potential of the broad U.S. continental shelf, as well as U.S. companies’ participation in exploration on the continental shelves of other countries, on balance the package contained in the Convention, including the modest revenue sharing provision, clearly serves U.S. interests.
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.