BILLINGS, Mont. (AP) -- Dozens of states will receive an estimated total of $110 million in mineral leasing payments from the federal government following a dispute over automatic spending cuts that drew a backlash from lawmakers in the West.
Interior officials previously defended the cuts by saying they had no choice in the matter under budget rules now in place.
But they said Tuesday that a months-long legal review of the Mineral Leasing Act determined the money must be paid to states at a later date.
"It's very clear those funds are not permanently canceled but withheld," said Interior budget director Pam Haze.
Thirty-five states had been denied a portion of their payments for 2013, under automatic spending cuts put in place after Congress failed to agree on a deficit reduction plan.
The money is derived primarily from payments by companies for oil and gas leasing on federal lands and production royalties. Mineral leasing revenues are typically split about evenly between the states and the Interior Department, with the states' portion paid out monthly.
The government last year paid $2.1 billion to the states under the program.
Critics had said the government had no right to withhold the money from states that bear the brunt of the impacts from energy extraction on federal lands.
U.S. Sen. Tom Udall, D-New Mexico, said the Obama administration's decision to distribute the money showed it had seen reason.
"These funds are the result of an existing agreement for mineral development," Udall said in a statement. "The government shouldn't be using them to balance its books."
The decision by the Interior Department came after lawmakers and governors from across the West pressed the Obama administration to restore the money. It will be given to the states sometime after the end of the fiscal year on Sept. 30, assuming the current law stays in place, agency officials said.
The cuts trimmed about 5 percent from all the states' shares. Wyoming led the list of potential losers, with at least $53 million at stake for 2013. New Mexico would have lost $26 million.
California, Colorado, Montana, North Dakota and Utah also faced multi-million dollar losses.
Haze said the legal review began almost as soon as the cuts were announced in March.
Renny MacKay, a spokesman for Wyoming Gov. Matt Mead, said he was pleased to get the news that the money would be returned to the state but was awaiting further details on what might happen in future years.
Meanwhile, western lawmakers plan to continue their push to remove the federal government's role as middle-man in the leasing program payments, said Daniel Head, a spokesman for U.S. Sen. Mike Enzi, R-Wyoming.
Legislation introduced in Congress in May would allow states to collect their own share of mineral revenues and also eliminate a 2 percent fee charged by the federal government.
The $110 million figure for all the states combined is only an estimate since the fiscal year does not end until Sept. 30 and all payments have not yet been collected.
Payments from revenues received in 2014 also will be withheld until the end of that fiscal year if the automatic budget cuts remain in place and unchanged, said Patrick Etchart, a spokesman with the Interior's Office of Natural Resources Revenue.
Etchart said withholding the money requires additional work by the agency, but it has no choice under the current budget rules.
"We are obliged to follow the law and that is what the law stipulates," he said.