Today, U.S. Senators Tom Udall (D-N.M.) and Chuck Grassley (R-Iowa) introduced the bipartisan Fair Returns for Public Lands Act of 2020 to update the nation’s antiquated public lands royalty system and ensure that taxpayers get fair returns on leases of public lands for oil and gas production.
The legislation modernizes the public lands leasing system since royalty rates were set a century ago in 1920. The legislation increases both the share of royalties that taxpayers receive from public lands leasing as well as rental rates. The new rate reflects the current fair market value, while the bill also establishes minimum bidding standards to lease public lands. Similar measures implemented in Texas and Colorado did not affect the states’ overall production.
The full bill text can be found HERE.
A background summary can be found HERE.
A section-by-section summary can be found HERE.
The following letter of support signed by 25 organizations was delivered to Capitol Hill today.
February 25, 2020
On behalf of our millions of members and supporters across the country, we the undersigned urge you to support the Fair Return for Public Lands Act, introduced by Senators Udall and Grassley on Tuesday, February 25, 2020. Federal revenue-generating policies for onshore oil and gas production have not kept pace and have fallen well behind the policies of most Western states.1Bucks, Dan. A Fair Return for the American People: Increasing Oil and Gas Royalties from Federal Lands. 2019, March. https://www.wilderness.org/sites/default/files/media/file/A%20Fair%20Return%20for%20the%20American%20People–Increasing%20Oil%20and%20Gas%20Royalties%20from%20Federal%20Lands-Updated.pdf
Congress has an opportunity to better protect taxpayers by updating the federal onshore fiscal rates. Doing so would ensure that companies are paying their fair share to taxpayers for the use of public lands to generate a private profit and would generate more revenue for states to help fund priority activities, like schools and infrastructure projects.
Oil and gas companies are getting sweetheart deals to develop America’s public lands at the expense of taxpayers and communities. The United States’ rental and royalty rates for oil and gas drilling on federal lands are woefully outdated; royalty rates have languished since 1920, and the minimum bid and rental rates have stayed flat since the mid-1980s, while drilling activity has more than doubled since 1985. As a result, taxpayers are not receiving fair market value for the commercial development of publicly owned oil and gas resources. Under the Federal Land Policy and Management Act, Americans are entitled to “fair market value [for] the use of the public lands and their resources….”243 U.S.C. § 1701(a)(9).
Similarly, the Mineral Leasing Act also directs the Bureau of Land Management (BLM) to employ fiscal policies that “enhance financial returns to the United States…”330 U.S.C. § 225(b)(1)(B).
If passed, the legislation would increase the onshore oil and gas royalty rate to at least 18.75%, minimum bids to at least $10/acre, and increase rental rates to at least $3/acre for the first five years and $5/acre for the next five years. GAO has repeatedly raised the alarm on the inadequacies of BLM’s current fiscal policies, concluding that improved royalty rates could increase revenues by $20 to $38 million per year. According to the analysis conducted by Taxpayers for Common Sense, if an 18.75% royalty instead of a 12.5% royalty had been assessed on all oil, gas, and natural gas liquids produced on federal lands from FY09-FY18, ONRR could have collected as much as $15.7 billion in additional revenue.
Western states like New Mexico, Utah, Nevada, Colorado could benefit most from this adjustment. According to new analyses, these outdated policies have cost New Mexicans $5 billion in revenue; Utahans $1.4 billion in revenue; Nevadans $50 million in revenue; and Coloradoans $1.3 billion in revenue. Annually, that adds up to billions lost to each state that could have helped fund after school programs, repave crumbling roads, or other state priorities.
Many western states have already strengthened their fiscal policies in order to provide a fairer return to taxpayers. In fact, all of the major oil and gas producing states in the West provide for higher royalty rates than the federal government’s onshore rate.4Id. at 9. According to GAO, “officials from Colorado and Texas said that they have raised their state royalty rates without a significant effect on production on state lands.”5Id. at 21.
It is incumbent on Congress to fix the broken onshore oil and gas leasing system and start putting American taxpayers, public lands, and communities first. Congress can do this by updating rental and royalty rates and minimum bids. We urge you to support the Fair Return for Public Lands Act to ensure the American people are getting a fair return from leasing and drilling on our public lands.
Climate Advocates Voces Unidas (CAVU)
Coalition to Protect America’s National Parks
Conservation for Economic Growth Coalition
Friends of Organ Mountains-Desert Peak
Friends of the Earth
League of Conservation Voters
National Parks Conservation Association
Natural Resources Defense Council
National Wildlife Federation
Nevada Wildlife Federation
New Mexico Interfaith Power and Light
New Mexico Voices for Children
New Mexico Wild
New Mexico Wildlife Federation
ProgressNow New Mexico
Southwest Environmental Center
The Wilderness Society
Vet Voices Foundation
Western Leaders Network
Western Organization of Resource Councils (WORC)
Western Values Project
- 1Bucks, Dan. A Fair Return for the American People: Increasing Oil and Gas Royalties from Federal Lands. 2019, March. https://www.wilderness.org/sites/default/files/media/file/A%20Fair%20Return%20for%20the%20American%20People–Increasing%20Oil%20and%20Gas%20Royalties%20from%20Federal%20Lands-Updated.pdf
- 243 U.S.C. § 1701(a)(9).
- 330 U.S.C. § 225(b)(1)(B).
- 4Id. at 9.
- 5Id. at 21.