diff --git a/breacharbiter.go b/breacharbiter.go
index 4c444710..1f93c6fe 100644
--- a/breacharbiter.go
+++ b/breacharbiter.go
@@ -28,6 +28,7 @@ type breachArbiter struct {
 	notifier   chainntnfs.ChainNotifier
 	chainIO    lnwallet.BlockChainIO
 	htlcSwitch *htlcSwitch
+	estimator  lnwallet.FeeEstimator
 
 	// breachObservers is a map which tracks all the active breach
 	// observers we're currently managing. The key of the map is the
@@ -64,7 +65,7 @@ type breachArbiter struct {
 // its dependent objects.
 func newBreachArbiter(wallet *lnwallet.LightningWallet, db *channeldb.DB,
 	notifier chainntnfs.ChainNotifier, h *htlcSwitch,
-	chain lnwallet.BlockChainIO) *breachArbiter {
+	chain lnwallet.BlockChainIO, fe lnwallet.FeeEstimator) *breachArbiter {
 
 	return &breachArbiter{
 		wallet:     wallet,
@@ -72,6 +73,7 @@ func newBreachArbiter(wallet *lnwallet.LightningWallet, db *channeldb.DB,
 		notifier:   notifier,
 		chainIO:    chain,
 		htlcSwitch: h,
+		estimator:  fe,
 
 		breachObservers:   make(map[wire.OutPoint]chan struct{}),
 		breachedContracts: make(chan *retributionInfo),
@@ -110,7 +112,7 @@ func (b *breachArbiter) Start() error {
 		len(activeChannels))
 	for i, chanState := range activeChannels {
 		channel, err := lnwallet.NewLightningChannel(nil, b.notifier,
-			chanState)
+			b.estimator, chanState)
 		if err != nil {
 			brarLog.Errorf("unable to load channel from "+
 				"disk: %v", err)
diff --git a/fundingmanager.go b/fundingmanager.go
index 5cfd233c..1042a936 100644
--- a/fundingmanager.go
+++ b/fundingmanager.go
@@ -130,6 +130,10 @@ type fundingConfig struct {
 	// funds from on-chain transaction outputs into Lightning channels.
 	Wallet *lnwallet.LightningWallet
 
+	// FeeEstimator calculates appropriate fee rates based on historical
+	// transaction information.
+	FeeEstimator lnwallet.FeeEstimator
+
 	// ArbiterChan allows the FundingManager to notify the BreachArbiter
 	// that a new channel has been created that should be observed to
 	// ensure that the channel counterparty hasn't broadcasted an invalid
@@ -959,7 +963,8 @@ func (f *fundingManager) waitForFundingConfirmation(completeChan *channeldb.Open
 
 	// With the channel marked open, we'll create the state-machine object
 	// which wraps the database state.
-	channel, err := lnwallet.NewLightningChannel(nil, nil, completeChan)
+	channel, err := lnwallet.NewLightningChannel(nil, nil,
+		f.cfg.FeeEstimator, completeChan)
 	if err != nil {
 		fndgLog.Errorf("error creating new lightning channel: %v", err)
 		return
diff --git a/lnd.go b/lnd.go
index 90da7f6b..ef56993a 100644
--- a/lnd.go
+++ b/lnd.go
@@ -149,11 +149,12 @@ func lndMain() error {
 	signer := wc
 	bio := wc
 	fundingSigner := wc
+	estimator := lnwallet.StaticFeeEstimator{FeeRate: 250}
 
 	// Create, and start the lnwallet, which handles the core payment
 	// channel logic, and exposes control via proxy state machines.
 	wallet, err := lnwallet.NewLightningWallet(chanDB, notifier, wc, signer,
-		bio, activeNetParams.Params)
+		bio, estimator, activeNetParams.Params)
 	if err != nil {
 		fmt.Printf("unable to create wallet: %v\n", err)
 		return err
@@ -191,7 +192,7 @@ func lndMain() error {
 	// With all the relevant chains initialized, we can finally start the
 	// server itself.
 	server, err := newServer(defaultListenAddrs, notifier, bio,
-		fundingSigner, wallet, chanDB, chainView)
+		fundingSigner, wallet, estimator, chanDB, chainView)
 	if err != nil {
 		srvrLog.Errorf("unable to create server: %v\n", err)
 		return err
diff --git a/lnwallet/channel.go b/lnwallet/channel.go
index b0a2e558..ad433a24 100644
--- a/lnwallet/channel.go
+++ b/lnwallet/channel.go
@@ -571,6 +571,10 @@ type LightningChannel struct {
 
 	status channelState
 
+	// feeEstimator is used to calculate the fee rate for the channel's
+	// commitment and cooperative close transactions.
+	feeEstimator FeeEstimator
+
 	// Capcity is the total capacity of this channel.
 	Capacity btcutil.Amount
 
@@ -679,11 +683,13 @@ type LightningChannel struct {
 // automatically persist pertinent state to the database in an efficient
 // manner.
 func NewLightningChannel(signer Signer, events chainntnfs.ChainNotifier,
-	state *channeldb.OpenChannel) (*LightningChannel, error) {
+	fe FeeEstimator, state *channeldb.OpenChannel) (*LightningChannel,
+	error) {
 
 	lc := &LightningChannel{
 		signer:                signer,
 		channelEvents:         events,
+		feeEstimator:          fe,
 		currentHeight:         state.NumUpdates,
 		remoteCommitChain:     newCommitmentChain(state.NumUpdates),
 		localCommitChain:      newCommitmentChain(state.NumUpdates),
diff --git a/lnwallet/channel_test.go b/lnwallet/channel_test.go
index 84fbb1d5..1a5d0c6e 100644
--- a/lnwallet/channel_test.go
+++ b/lnwallet/channel_test.go
@@ -306,12 +306,15 @@ func createTestChannels(revocationWindow int) (*LightningChannel, *LightningChan
 	bobSigner := &mockSigner{bobKeyPriv}
 
 	notifier := &mockNotfier{}
+	estimator := &StaticFeeEstimator{50, 6}
 
-	channelAlice, err := NewLightningChannel(aliceSigner, notifier, aliceChannelState)
+	channelAlice, err := NewLightningChannel(aliceSigner, notifier,
+		estimator, aliceChannelState)
 	if err != nil {
 		return nil, nil, nil, err
 	}
-	channelBob, err := NewLightningChannel(bobSigner, notifier, bobChannelState)
+	channelBob, err := NewLightningChannel(bobSigner, notifier,
+		estimator, bobChannelState)
 	if err != nil {
 		return nil, nil, nil, err
 	}
@@ -1362,12 +1365,12 @@ func TestStateUpdatePersistence(t *testing.T) {
 	}
 	notifier := aliceChannel.channelEvents
 	aliceChannelNew, err := NewLightningChannel(aliceChannel.signer,
-		notifier, aliceChannels[0])
+		notifier, aliceChannel.feeEstimator, aliceChannels[0])
 	if err != nil {
 		t.Fatalf("unable to create new channel: %v", err)
 	}
 	bobChannelNew, err := NewLightningChannel(bobChannel.signer, notifier,
-		bobChannels[0])
+		bobChannel.feeEstimator, bobChannels[0])
 	if err != nil {
 		t.Fatalf("unable to create new channel: %v", err)
 	}
diff --git a/lnwallet/interface.go b/lnwallet/interface.go
index 3579cbad..6159a02c 100644
--- a/lnwallet/interface.go
+++ b/lnwallet/interface.go
@@ -302,6 +302,26 @@ type MessageSigner interface {
 	SignMessage(pubKey *btcec.PublicKey, msg []byte) (*btcec.Signature, error)
 }
 
+// FeeEstimator provides the ability to estimate on-chain transaction fees for
+// various combinations of transaction sizes and desired confirmation time
+// (measured by number of blocks).
+type FeeEstimator interface {
+	// EstimateFeePerByte takes in a target for the number of blocks until
+	// an initial confirmation and returns the estimated fee expressed in
+	// satoshis/byte.
+	EstimateFeePerByte(numBlocks uint32) uint64
+
+	// EstimateFeePerWeight takes in a target for the number of blocks until
+	// an initial confirmation and returns the estimated fee expressed in
+	// satoshis/weight.
+	EstimateFeePerWeight(numBlocks uint32) uint64
+
+	// EstimateConfirmation will return the number of blocks expected for a
+	// transaction to be confirmed given a fee rate in satoshis per
+	// byte.
+	EstimateConfirmation(satPerByte int64) uint32
+}
+
 // WalletDriver represents a "driver" for a particular concrete
 // WalletController implementation. A driver is identified by a globally unique
 // string identifier along with a 'New()' method which is responsible for
diff --git a/lnwallet/interface_test.go b/lnwallet/interface_test.go
index 63e1ec5d..f6bfe7eb 100644
--- a/lnwallet/interface_test.go
+++ b/lnwallet/interface_test.go
@@ -339,8 +339,9 @@ func createTestWallet(tempTestDir string, miningNode *rpctest.Harness,
 		return nil, err
 	}
 
+	estimator := lnwallet.StaticFeeEstimator{FeeRate: 250}
 	wallet, err := lnwallet.NewLightningWallet(cdb, notifier, wc, signer,
-		bio, netParams)
+		bio, estimator, netParams)
 	if err != nil {
 		return nil, err
 	}
diff --git a/lnwallet/wallet.go b/lnwallet/wallet.go
index 15cd3790..e415e6de 100644
--- a/lnwallet/wallet.go
+++ b/lnwallet/wallet.go
@@ -273,6 +273,10 @@ type LightningWallet struct {
 	// update the commitment state.
 	Signer Signer
 
+	// FeeEstimator is the implementation that the wallet will use for the
+	// calculation of on-chain transaction fees.
+	FeeEstimator FeeEstimator
+
 	// ChainIO is an instance of the BlockChainIO interface. ChainIO is
 	// used to lookup the existence of outputs within the UTXO set.
 	ChainIO BlockChainIO
@@ -320,12 +324,13 @@ type LightningWallet struct {
 // initialized/started before being passed as a function arugment.
 func NewLightningWallet(cdb *channeldb.DB, notifier chainntnfs.ChainNotifier,
 	wallet WalletController, signer Signer, bio BlockChainIO,
-	netParams *chaincfg.Params) (*LightningWallet, error) {
+	fe FeeEstimator, netParams *chaincfg.Params) (*LightningWallet, error) {
 
 	return &LightningWallet{
 		chainNotifier:    notifier,
 		Signer:           signer,
 		WalletController: wallet,
+		FeeEstimator:     fe,
 		ChainIO:          bio,
 		ChannelDB:        cdb,
 		msgChan:          make(chan interface{}, msgBufferSize),
@@ -490,6 +495,7 @@ func (l *LightningWallet) InitChannelReservation(capacity,
 
 	errChan := make(chan error, 1)
 	respChan := make(chan *ChannelReservation, 1)
+	minFeeRate := btcutil.Amount(l.FeeEstimator.EstimateFeePerWeight(1))
 
 	l.msgChan <- &initFundingReserveMsg{
 		capacity:      capacity,
@@ -497,6 +503,7 @@ func (l *LightningWallet) InitChannelReservation(capacity,
 		fundingAmount: ourFundAmt,
 		csvDelay:      csvDelay,
 		ourDustLimit:  ourDustLimit,
+		minFeeRate:    minFeeRate,
 		pushSat:       pushSat,
 		nodeID:        theirID,
 		nodeAddr:      theirAddr,
@@ -1434,3 +1441,28 @@ func coinSelect(feeRate uint64, amt btcutil.Amount,
 		return selectedUtxos, changeAmt, nil
 	}
 }
+
+// StaticFeeEstimator will return a static value for all fee calculation
+// requests. It is designed to be replaced by a proper fee calcuation
+// implementation.
+type StaticFeeEstimator struct {
+	FeeRate      uint64
+	Confirmation uint32
+}
+
+// EstimateFeePerByte will return a static value for fee calculations.
+func (e StaticFeeEstimator) EstimateFeePerByte(numBlocks uint32) uint64 {
+	return e.FeeRate
+}
+
+// EstimateFeePerWeight will return a static value for fee calculations.
+func (e StaticFeeEstimator) EstimateFeePerWeight(numBlocks uint32) uint64 {
+	return e.FeeRate * 4
+}
+
+// EstimateConfirmation will return a static value representing the estimated
+// number of blocks that will be required to confirm a transaction for the
+// given fee rate.
+func (e StaticFeeEstimator) EstimateConfirmation(satPerByte int64) uint32 {
+	return e.Confirmation
+}
diff --git a/peer.go b/peer.go
index 912de771..74a5fe54 100644
--- a/peer.go
+++ b/peer.go
@@ -288,7 +288,7 @@ func (p *peer) loadActiveChannels(chans []*channeldb.OpenChannel) error {
 		}
 
 		lnChan, err := lnwallet.NewLightningChannel(p.server.lnwallet.Signer,
-			p.server.chainNotifier, dbChan)
+			p.server.chainNotifier, p.server.feeEstimator, dbChan)
 		if err != nil {
 			return err
 		}
diff --git a/rpcserver.go b/rpcserver.go
index 3a9ff20f..a245e878 100644
--- a/rpcserver.go
+++ b/rpcserver.go
@@ -688,7 +688,7 @@ func (r *rpcServer) fetchActiveChannel(chanPoint wire.OutPoint) (*lnwallet.Light
 	// Otherwise, we create a fully populated channel state machine which
 	// uses the db channel as backing storage.
 	return lnwallet.NewLightningChannel(r.server.lnwallet.Signer, nil,
-		dbChan)
+		lnwallet.StaticFeeEstimator{FeeRate: 250}, dbChan)
 }
 
 // forceCloseChan executes a unilateral close of the target channel by
diff --git a/server.go b/server.go
index 0753fe62..24698ed9 100644
--- a/server.go
+++ b/server.go
@@ -62,8 +62,9 @@ type server struct {
 
 	chainNotifier chainntnfs.ChainNotifier
 
-	bio      lnwallet.BlockChainIO
-	lnwallet *lnwallet.LightningWallet
+	bio          lnwallet.BlockChainIO
+	lnwallet     *lnwallet.LightningWallet
+	feeEstimator lnwallet.FeeEstimator
 
 	fundingMgr *fundingManager
 	chanDB     *channeldb.DB
@@ -108,8 +109,8 @@ type server struct {
 // passed listener address.
 func newServer(listenAddrs []string, notifier chainntnfs.ChainNotifier,
 	bio lnwallet.BlockChainIO, fundingSigner lnwallet.MessageSigner,
-	wallet *lnwallet.LightningWallet, chanDB *channeldb.DB,
-	chainView chainview.FilteredChainView) (*server, error) {
+	wallet *lnwallet.LightningWallet, estimator lnwallet.FeeEstimator,
+	chanDB *channeldb.DB, chainView chainview.FilteredChainView) (*server, error) {
 
 	privKey, err := wallet.GetIdentitykey()
 	if err != nil {
@@ -131,6 +132,7 @@ func newServer(listenAddrs []string, notifier chainntnfs.ChainNotifier,
 		bio:           bio,
 		chainNotifier: notifier,
 		chanDB:        chanDB,
+		feeEstimator:  estimator,
 
 		invoices:    newInvoiceRegistry(chanDB),
 		utxoNursery: newUtxoNursery(chanDB, notifier, wallet),
@@ -264,7 +266,7 @@ func newServer(listenAddrs []string, notifier chainntnfs.ChainNotifier,
 
 	s.rpcServer = newRPCServer(s)
 	s.breachArbiter = newBreachArbiter(wallet, chanDB, notifier,
-		s.htlcSwitch, s.bio)
+		s.htlcSwitch, s.bio, s.feeEstimator)
 
 	var chanIDSeed [32]byte
 	if _, err := rand.Read(chanIDSeed[:]); err != nil {
@@ -272,10 +274,11 @@ func newServer(listenAddrs []string, notifier chainntnfs.ChainNotifier,
 	}
 
 	s.fundingMgr, err = newFundingManager(fundingConfig{
-		IDKey:    s.identityPriv.PubKey(),
-		Wallet:   wallet,
-		ChainIO:  s.bio,
-		Notifier: s.chainNotifier,
+		IDKey:        s.identityPriv.PubKey(),
+		Wallet:       wallet,
+		ChainIO:      s.bio,
+		Notifier:     s.chainNotifier,
+		FeeEstimator: s.feeEstimator,
 		SignMessage: func(pubKey *btcec.PublicKey, msg []byte) (*btcec.Signature, error) {
 			if pubKey.IsEqual(s.identityPriv.PubKey()) {
 				return s.nodeSigner.SignMessage(pubKey, msg)
@@ -300,8 +303,10 @@ func newServer(listenAddrs []string, notifier chainntnfs.ChainNotifier,
 
 			for _, channel := range dbChannels {
 				if chanID.IsChanPoint(channel.ChanID) {
-					return lnwallet.NewLightningChannel(wallet.Signer,
-						notifier, channel)
+					return lnwallet.NewLightningChannel(
+						wallet.Signer, notifier,
+						lnwallet.StaticFeeEstimator{FeeRate: 250},
+						channel)
 				}
 			}