DENVER – In response to today’s announcement that the Bureau of Land Management is releasing an “Advanced Notice of Proposed Rulemaking” to ensure that taxpayers receive a fair return for oil and gas development on their public lands, Greg Zimmerman, Policy Director at the Center for Western Priorities, released the following statement:
“For the first time in nearly a century, steps are being taken to ensure that oil and gas companies pay their fair share to drill on our national public lands. A responsible approach to energy development requires that taxpayers be fairly compensated for development, and it’s past time for the federal government to bring royalty rates in line with what Western states charge.”
Background on onshore oil and gas royalty rates and other outdated policies regarding energy development on national public lands:
The federal government currently charges a royalty rate of 12.5 percent on onshore public lands, which has not been changed since the 1920’s.
The federal onshore royalty is lower than royalty rates in Western states, which charge between 16.67 and 25 percent. Offshore oil companies generally pay a rate of 18.75 percent.
This gap between the federal and state royalty rate shortchanges American taxpayers $500 million per year.
State taxpayers in Western states get an even split of federal royalty revenues, and will be able to use these critical funds to address the impacts of drilling.
President George W. Bush used his executive authority to increase offshore royalty rates.
It costs only $1.50 per year to rent an acre of public lands for oil and gas drilling, which provides little incentive to bring leases into production. Adjusting the rental rate up to just $3.00 for the first five years of a lease and $5.00 thereafter would have generated an additional $56 million for taxpayers over the course of one year.
For background, please see CWP’s 2013 report entitled A Fair Share: The Case for Updating Federal Royalties and its Fair Share campaign website.