United States Rep. Alan Lowenthal (CA-47), along with co-sponsor Rep. Raul Grijalva (AZ-03), introduced legislation on Jan. 13 that would raise the rate oil and gas companies pay for leasing public lands to ensure that the American people are being fairly compensated for the extraction of resources on public lands, according to Lowenthal’s office.
Lowenthal serves as the ranking member of the House Natural Resources Committee’s Energy and Mineral Resources Subcommittee. Grijalva is the ranking member of the Natural Resources Committee.
“Companies hold roughly 50,000 oil and gas leases on over 34 million acres of onshore federal land. That is larger than the size of North Carolina,” Lowenthal said. “These bargain-basement leases offer insufficient return to the public but allow companies to reap tremendous profits from the development of oil and gas on our public lands. The American people are getting shortchanged for the extraction of their resources.”
Lowenthal’s bill, the “Ensuring the Taxpayer a Fair Return for Federal Onshore Oil and Gas Resources Act,” would raise the onshore royalty rate from 12.5 percent to 18.75 percent. This is the rate oil and gas companies pay the government for removing and selling publicly owned oil or gas. An increase to 18.75 percent would bring the onshore rate in line with what the federal government currently charges companies for federal offshore production. Today, states like Montana, Oklahoma and North Dakota all charge a higher royalty rate for oil and gas produced on state lands than the federal government does for oil and gas produced on public lands— Texas even charges 25 percent, according to Lowenthal’s office.
“For far too long, oil and gas companies have enjoyed big profits and easy access to public resources without paying fair royalties,” Grijalva said. “I’m glad to have Natural Resources Committee Democrats play a leading role in moving us closer to a more balanced national energy policy. President Obama rightly called [Tuesday] night for a better accounting of those companies’ costs to taxpayers. This bill is the next step in that process, and I look forward to continuing to build support for it with members of both parties who recognize just how overdue this change really is.”
The legislation would divide the additional royalty revenue from new leases among four different areas: the individual states where the production occurs; to be used for properly remediating orphan wells; oil and gas operations inspection and enforcement; and, the U.S. Treasury for deficit reduction.
In offering their support for the legislation, the good-government watchdog group Project On Government Oversight (POGO) said, “This bill would maximize taxpayer revenues by requiring oil and gas companies that extract oil and gas from federal onshore lands to pay a higher royalty rate, just as companies already do on federal offshore areas and on state lands. The changes to how this revenue is distributed will provide funds to necessary orphan well remediation in addition to oil and gas well inspection and enforcement.”
In addition, the bill addresses the low minimum bid and rental rates for public lands. Currently, companies only have to bid $2 per acre upfront and then pay $1.50 per acre each subsequent year to secure and hold the valuable mineral rights of public lands. These rights are sometimes worth hundreds of millions of dollars. These rates were last set by Congress in the 1980s and have not been adjusted since.
Lowenthal’s bill increases the minimum bid to $4 per acre and the rental rate to $3 per acre per year. It also mandates that these values be periodically adjusted for inflation.
“It is important we modernize the way we do business on public lands,” said Joshua Mantell of The Wilderness Society. “The introduction of this legislation is significant. Raising oil and gas royalty rates to reflect the current value of our shared public lands and allocating money towards ensuring safe and responsible development is crucial to establishing 21st-century public lands management.”
Echoing the sentiment, Athan Manuel, the Sierra Club’s Lands Protection program director, said, “The oil and gas industry has benefited from outdated royalty rates for leasing our public lands, while the American people are forced to suffer the consequences of fossil fuel extraction. This commonsense legislation will help curb the devastating effects of climate disruption.”
Western Organization of Resource Councils board member Bob LeResche added, “Rep. Lowenthal’s bill contains basic good governance updates to ensure we are receiving a fair return for taxpayer-owned oil and gas. The increases in minimum bids and rental rates are long overdue, and the royalty rate increase will finally bring federal rates closer to those most private and state mineral owners are receiving. Funding to clean up abandoned or orphaned wells is a most important provision, especially now, when more and more oil and gas companies going bankrupt and leaving behind insufficient bonds to reclaim sites. $25 million per year is a start, but is unlikely to be sufficient to address this growing need.”
