RELEASE: Outdated Oil and Gas Royalty Rates on National Public Lands Cost Western Taxpayers Up To $730 Million Annually

Jun 18, 2015

DENVER—The Center for Western Priorities today released a report highlighting how Western state taxpayers lose between $490 million and $730 million annually due to low royalty rates for oil and gas extracted from U.S. public lands.

The report—“A Fair Share: The Case for Updating Oil and Gas Royalty Rates on Our Public Lands”—comes as the Interior Department and the Bureau of Land Management formally consider modernizing the oil and gas royalty rate on U.S. public lands, which currently stands at 12.5 percent and is unchanged since the 1920s.

“Part of a responsible energy strategy is guaranteeing that taxpayers receive a fair share, but U.S. policy remains badly behind the times,” said Greg Zimmerman, policy director at the Center for Western Priorities. “Westerners are getting shortchanged by oil and gas companies operating on America’s public lands, and it’s only getting worse,” continued Zimmerman.

The low royalty rate on U.S. public lands is in stark contrast to states in the Mountain West, which all charge a royalty rate between 16.67 percent and 18.75 percent on oil and gas produced from state lands.

An earlier version of “A Fair Share” was released in 2013. Due to rising oil production levels on U.S. public lands, Western state taxpayers lost between $80 million and $125 million more than when CWP first released the report two years ago.

The Interior Department and the Bureau of Land Management announced earlier this year that they would review low oil and gas royalty rates and other outdated energy policies on public lands. The BLM is currently accepting public comments through June 19th on an Advanced Notice of Proposed Rulemaking that considers modernizing the royalty rate.

“Here’s a golden opportunity for simple, commonsense reforms so taxpayers receive a fair return from the use of public resources,” said Zimmerman. “Both Western and American taxpayers are being deprived of urgently needed revenue that could be used to pay down the national debt, increase education funding, expand access to recreation opportunities, and improve infrastructure strained by oil and gas development.”

Royalties from oil and gas drilling on U.S. public lands are split approximately evenly between state taxpayers where production occurs and American taxpayers. As a result, American taxpayers are deprived an equivalent amount of revenue annually – between $490 million and $730 million – because of antiquated policies. In total, American and state taxpayers are loosing in excess of $1 billion each year on oil and gas produced in Mountain West states from U.S. public lands.

The Center For Western Priorities earlier this year launched an informational website——that details a number of problems with the current system of compensating taxpayers for fossil fuel extraction on American public lands.