The industry receives discounted royalty rates on oil and gas coming from federal lands, and it’s the American taxpayer that pays the brunt of the consequences.
Oil and gas from Bureau of Land Management and Forest Service lands belong to all Americans; just like the land above it. The government rents the land to oil and gas to companies that drill out the fossil fuels below. But the government is renting the land cheaply, and selling the oil and gas well below market value - shortchanging U.S. taxpayers in the process.
According to the report, written by the Center for Western Priorities, rental rates for federal land are a paltry $1.50/acre for the first 5 years of a lease, and $2/acre after. For the sake of comparison, state-owned land in Texas (home to some of the most drilling in the nation) goes for $5/acre in the first three years and a staggering $25/acre after that.
By adjusting rental rates just a little bit – the report suggests $3/acre for the first 5 years and $5/acre thereafter – the federal treasury would have more than $55 million in new revenue every year. In these hard budget times, the U.S. taxpayer could benefit from receiving a fair market value for the lands we have entrusted the federal government to manage.
The increased rates for long-held land are important; it discourages companies from locking up large swaths of American land without developing it. Of the nearly 36 million acres of leased land in the country, more than 23 million acres are sitting idle. These are areas that can be home to wildlife, hiking and biking trails, and other values.
In places where drilling occurs on public lands, there are other economic costs to local communities – like outdoor recreation. The loss of access for hunting, fishing and camping means that local communities are bearing an even bigger burden than the average tax payer—they are also losing out on ecotourism dollars that come from recreating and exploring on public lands.
Fees associated with drilling on our public lands should take into account the full impact of development, not just the pure cost of the land. Also, given the cost to our air and health combined with the threat of climate change from burning oil and gas, the costs of doing business on our public lands far exceeds the revenue us taxpayers are seeing.
At a time that wildfires are severely hurting federal budgets because of their sheer quantity and intensity, and national parks find themselves with huge maintenance backlogs, it is time for the oil and gas industry to pay their fair share.
It’s clear that many Members of Congress agree – more than 43 members of the House of Representatives sent a letter to Secretary Jewell - requesting a process to raise the royalty rates to competitive levels and making sure that the American people get adequate returns for the use of their land.