Gone with the Wind: How Taxpayers Are Losing Millions in Revenue from Wasted Gas

Press ReleaseGone with the Wind: How Taxpayers Are Losing Millions in Revenue from Wasted Gas

Energy & Natural Resources  | Quick Takes
Aug 11, 2016  | 3 min read

WASHINGTON, DC —Federal taxpayers lost nearly $600 million in royalty revenues during a 10-year period ending in 2015 because of royalty breaks given by the Interior Department on natural gas extracted from onshore federal leases, according to a review of government data conducted by Taxpayers for Common Sense.

In a special report entitled, “Gone with the Wind: How Taxpayers are Losing from Wasted Gas,’’ the independent budget watchdog detailed how Interior Department rules allow oil and gas companies to reap massive benefits on natural gas extracted from federal lands. The reason: The companies were not required to pay royalties—generally 12.5 percent—on gas leaked or used in their drilling operations.

The report was posted on TCS’ website, www.taxpayer.net.

The Bureau of Land Management, the Interior agency that manages natural gas extraction, is now finalizing a new rule aimed at increasing oversight and taxpayer revenues. The BLM first announced its intention to draft the rule in April 2014.

“It is ridiculous that taxpayers are effectively subsidizing energy companies that already are profiting from their operations on federal lands,’’ says Ryan Alexander, the president of TCS. “It’s time—past time—for the Bureau of Land Management to establish a sound oversight program that gives taxpayers a fair return for their resources.’’

TCS’ findings were based on a review of data about the disposition of federal gas on onshore federal lands provided by the Interior Department for the 10-year period ending in 2015. The analysis shows that taxpayers lost $574 million in revenue because of royalty breaks given to companies by the Bureau of Land Management.

Highlights of those findings:

  • Oil and gas operators use gas from the lands to extract the resource on federal lands at no cost to themselves. The estimated taxpayer loss: $465.1 million in royalty payments.
  • BLM rules allow companies to avoid paying a royalty on gas “unavoidably’’ lost from venting and flaring operations. Cost to taxpayers was estimated to be $109.8 million.
  • BLM’s system of oversight is seriously flawed. BLM field offices are inconsistent in applying department guidance for allowing gas to be leaked (flared and vented) on federal lands. Lost gas means lost revenue to taxpayers.

The BLM’s proposed final rule, entitled, “Waste Prevention, Production Subject to Royalties, and Resource Conservation,’’ is designed to decrease the loss of gas from oil and gas drilling. The rule is expected to be issued later this year.

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