Sens. Chuck Grassley (R-Iowa) and Jacky Rosen (D-Nev.) sent a letter to U.S Department of the Interior Secretary Deb Haaland, urging the Department – which is in the midst of a comprehensive review of the federal oil and gas program – to include their bipartisan Fair Returns for Public Lands Act as a policy recommendation in their finalized report. The Senators’ legislation seeks to update the nation’s outdated public lands royalty system and ensure that taxpayers and rural communities get fair returns on leases of public lands for oil and gas production.
“As you know, the Department of the Interior’s rental and royalty rates for oil and gas drilling on federal lands have not been updated since 1920 and the minimum bid and rental rates have remained stagnant since 1987,” wrote the Senators. “As a result, taxpayers are not receiving fair market value for the commercial development of publicly-owned oil and gas resources. Our legislation would increase the royalty rate from 12.5 percent to 18.75 percent, which the Congressional Budget Office estimates would generate $200 million in net federal income over a 10-year period.”
“The Fair Returns for Public Lands Act can bring our federal leasing system into the 21st century and ensure that state and local governments across the nation receive fair compensation to fund critical education, infrastructure, and public health projects. We strongly urge you and the Department to consider this legislation and incorporate it in your recommendations to Congress to improve our federal oil and gas program,” the Senators’ letter continued.
Over one hundred years ago, Congress passed the Mineral Leasing Act of 1920, setting up a system in which companies could lease public lands to wrest valuable oil and gas from the ground. In the century since, the royalties and rent that those corporations pay to the American people for access have remained essentially unchanged even as the scale of development and profits has grown.
The federal royalty rate for drilling in federal waters, at 18.75 percent, is 50 percent higher than it is on land. According to a 2015 study by the Center for Western Priorities, if the onshore federal royalty rate were the same as the 18.75 percent offshore rate, the U.S. government and the affected states would have collected up to $730 million annually in additional revenue.
In the 2019 fiscal year, the United States received $2.931 billion in royalties from onshore oil and gas production on federal lands. The overall value of those resources computes to $23.4 billion at a 12.5 percent royalty rate.
The Fair Returns for Public Lands Act would set a uniform federal royalty at 18.75 percent, applied to new oil and gas leases. The Congressional Budget Office estimated that this royalty would raise $200 million in federal revenue over the next 10 years, with an equivalent amount returned to the states where the oil or gas is being extracted. This bill will also increase the rates for reinstated oil and gas leases, which will discourage oil and gas developers from holding onto leases on public lands they do not intend to actually explore or develop.
Full text of the letter can be found HERE.
Original source can be found here.
