Arguing that UNCLOS imposes new taxing authority distorts actual facts and overstates actual impact of royalty payments
The US government receives one of the lowest government “takes” (total revenue, as a percentage of the value of the oil and natural gas produced) in the world.98 Thus, it should come as no surprise that the petroleum industry has deemed the miniscule ISA royalties as entirely reasonable. The petroleum industry has agreed to pay all royalties associated with deep seabed extractions—beyond 200 nautical miles—to the US Treasury, just as they would when drilling within the US EEZ.99 For the first five years of production, no royalties are required to be paid to the ISA; only once the sixth year of drilling commences would the US be required to remit a small percentage, 1%, of their drilling royalties, to the ISA.100 In other words, the money the ISA receives, beginning during the sixth year of drilling, is essentially subtracted from the revenue the US would otherwise receive from the royalty payments made by the petroleum industry. To depict the ISA as an international taxing authority, infringing on US sovereignty, that will drain US tax revenue is a hyperbolic mischaracterization that distorts not only the impact of article 82, but also skews the entirety of the UNCLOS debate itself.
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Opponents argue that by ratifying UNCLOS, the United Nations would be given the first opportunity to tax U.S. citizens. However, this is a misunderstanding of the royalties structure within UNCLOS. The International Seabed Authority requires royalty payments from all companies engaged in seabed mining in areas that do not belong to any country and are therefore under the management of the ISA. These payments are a small fraction of the revenue and similar to payments U.S. companies already pay around the world to governments for resource concessions.Related Quotes:
- UNCLOS stipulates modest fees on resource extraction industries but does not represent new taxing authority
- UNCLOS does not impose a tax but a royalty scheme that comes with unprecedented U.S. control over administration
- UNCLOS does not establish tax on corporations or individuals, only a modest revenue sharing agreement for mineral/energy extraction in international waters
- Royalty payments in UNCLOS are neither unique nor burdensome which is why the oil and gas industry views them as a bargain and favors UNCLOS ratification
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