U.S. Sen. Tom Udall introduces bill to 'modernize' oil and gas fees on federal land
Royalty, rental rates would be hiked if bill passes
U.S. Sen. Tom Udall (D-NM) hoped to target oil and gas leases by increasing rental rates and the amount of royalties returned to U.S. taxpayers from extraction operations.
Udall and Sen. Chuck Grassley (R-Iowa) announced the Fair Returns for Public Lands Act of 2020, aiming to modernize public lands leasing policy, which the senators argued hadn’t been adjusted since 1920.
The new rates proposed in the bill were intended to reflect market value, Udall said while also establishing minimum standards for bids to lease public lands for oil and gas.
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Similar measures were established in Texas and Colorado, he argued, and did not impact those state’s overall fossil fuel production.
The U.S. overtook Russia and Saudi Arabia in 2018 to become the world’s largest producer of oil and gas, with much of the onshore production centered in the Permian Basin, which straddles the state line between Texas and Udall’s home state of New Mexico.
Oil production on state lands contributed significantly to a $800 million surplus in funding for the State of New Mexico in 2020, and Udall argued taxpayers should get even more from operations on federal land.
“Public lands and their natural resources belong to the American people, and it’s only fair to ask those who profit from them to return a fair share to taxpayers,” Udall said.
“Oil and gas companies are paying significantly higher royalty rates offshore and on many state and private lands, and there is no need to give federal onshore producers a sweetheart deal at a time of record U.S. production along with rising climate change and habitat impacts.”
The bill would make alterations to the federal Mineral Leasing Act, which first went into law in 1920, increasing fees and royalty payments to state and federal government intended to adapt to the nation’s boom in production.
“After 100 years of the Mineral Leasing Act, it is high time for real reform that gives state and federal taxpayers their fair share of royalties that fund important education, infrastructure, public health and environmental needs in communities across the country and particularly in the West,” Udall said.
“I am proud to introduce this commonsense, bipartisan bill with Sen. Grassley to ensure that New Mexicans and the American people get a fair deal when they let for-profit companies operate on their public land.”
Grassley said the low, antiquated royalty rates cost the Federal Treasury billions of dollars in potential revenue.
He blamed the oil and gas industry for taking advantage of what Grassley called a “loop hole.”
“Today marks 100 years since Congress passed the Mineral Leasing Act of 1920. Since then, the royalty rate has not been addressed. This is just one example of big oil saying it wants a free market, but lobbying for taxpayer-funded corporate welfare,” he said.
“It’s time for my colleagues in Congress to end this oil company loophole, end the corporate welfare and bring oil leasing into the 21st century.”
Research from the Congressional Budget Office (CBO) and Government Accountability Office (GAO) showed modernizing oil and gas’ royalty rates on public lands could increase federal revenue by as much as $200 million over the next decade without impacting production, read a news release from Udall’s office.
The Act would increase the royalty rate from 12.5 percent under the current law, to 18.75 percent.
It would also drive up the minimum, per-acre bid from $2 per acre to $10 per acres. The bill, if approved, would also establish a minimum $15 per-acre bid when oil and gas companies nominate parcels of land for lease auctions.
Rental rates would increase to $3 per acre on federal land for the first five years of a lease, and $5 per acre subsequently.
Reinstated leases would pay $20 per acre for rental rates, and 25 percent royalty rates.
The bill would also require that rates be adjusted for inflation at least every four years.
A report from Taxpayers for Common Sense showed New Mexico lost about $2.5 billion in revenue through the last decade due to “outdated federal rental rates, below-market royalty rates, and waste from oil and gas wells.”
The report showed federal taxpayers lost an equivalent amount for the same reasons.
“Oil and gas companies should not be allowed to lease New Mexico’s breathtaking public lands, which provide habitat for critical wildlife, for pennies on the dollar,” said Jesse Deubel, executive director of the New Mexico Wildlife Federation.
“Senator Udall’s new bipartisan legislation will put an end to this practice by updating the federal onshore oil and gas leasing system to ensure that our state’s long heritage of fishing, hunting, and outdoor recreation will remain for generations to come.”
Adrian Hedden can be reached at 575-628-5516, email@example.com or @AdrianHedden on Twitter.