Oil and Gas Companies Keep Taking From Taxpayers. And Taking. Congress Should Raise the Royalty Rates on Federal Lands.

by Senators Tom Udall (D-N) and Charles Grassley (R-IA) (New York Times) One hundred years ago, Congress passed the Mineral Leasing Act of 1920, setting up a system in which companies 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 hugely.

As senators from different parties, we have our share of policy differences. But we both believe in sticking up for the public interest and the taxpayer. In this case, we agree that oil and gas companies should pay fair market value for the public resources they extract and sell. They aren’t doing that now — not even close — and the American public is the big loser.

States in the West, meanwhile, lease their land with higher royalty rates. Montana, Utah and Wyoming charge 16.67 percent; in Texas, the rate is 25 percent. The 12.5 percent federal rate amounts to an unnecessary subsidy to the oil and gas industries. Worse, the Interior Department agreed to lower even that paltry rate temporarily during the pandemic to an average of less than 1 percent for companies that sought a reduction.

And it isn’t just the royalty rate that needs an update. The minimum bid for oil and gas companies that want to lease federal land for exploration and extraction has not increased in over 30 years. Today, they can lease federal land for a minimum of just $2 per acre — cheaper than a cup of coffee in many places.

Setting the minimum bid at auction at $10 per acre is one way to encourage oil and gas developers to more selectively purchase leases and clarify their intentions for the lands they lease. In addition, enacting a $15 per acre minimum fee for submitting an expression of interest to lease will also deter speculation. Such fees are already required on many state lands, including in Colorado, North Dakota and Texas. READ MORE