On September 3, Representative Dexter (D-CA) introduced legislation focused on improving accountability for oil and gas operators on federal lands and waters and better ensuring taxpayers receive a fair return from the development of our valuable energy resources.

Federal taxpayers own mineral resources across the United States, including a 700 million-acre onshore and 3.2 billion acre offshore subsurface mineral estate. The Bureau of Land Management (BLM) and Bureau of Ocean Energy Management (BOEM), within the Department of the Interior (DOI), oversees this mineral estate and is charged with managing the development of those resources and ensuring taxpayers a fair return. Providing unnecessary subsidies through royalty relief, generous transportation allowances, and outdated penalties costs taxpayers in valuable revenue and rewards already profitable oil and gas companies.

Reining in Royalty Relief

Royalties are the primary mechanism by which the federal government ensures taxpayers receive a fair return from development of our valuable energy resources. In 2025, DOI collected $11.8 billion in oil and gas royalties — accounting for 97% of revenue from the onshore and offshore oil and gas programs and 85% of revenue from all federal mineral and energy resources, including coal and geothermal leases.

The federal government has the authority to provide discretionary royalty relief depending on economic circumstances, and, in some cases, is required to provide automatic royalty relief. Unfortunately for taxpayers, this has resulted in billions of dollars in revenue left on the table every year and kept taxpayers from getting a fair return on the development of taxpayer-owned oil and gas. The Government Accountability Office estimates that forgone revenues from royalty relief approved over just two months, May and June of 2020, totaled $4.5 million.

The “Taxpayer Relief from Big Oil Act” would:

• Eliminate shallow water royalty relief, which requires royalty relief of not less than 35 billion cubic feet from ultra deep wells in shallow waters of the Gulf of America. (42 U.S.C. 15904)
• Eliminate offshore Alaska royalty relief, which gives the Secretary the authority to provide royalty relief in the planning areas offshore Alaska. (43 U.S.C. 1337(a)(3)(B))
• Eliminate National Petroleum Reserve Alaska (NPR-A) royalty relief, which gives the Secretary the authority to provide royalty relief to “encourage the greatest ultimate recovery of oil or gas or in the interest of conservation” in the NPR-A. (42 U.S.C. 6506a(k))
• Implement other changes to oil and gas leasing in the NPR-A, including:
  • Prioritizing subsistence, recreational, fish and wildlife, or historical or scenic value—not reserve exploration—in the Utukok River, the Teshekpuk Lake areas and other areas on the NPR-A with significant value. (42 U.S.C. 6504(a))
  • Eliminating the renewal of nonproducing leases—currently allowed for leases on or after August 8, 2005—and eliminating “circumstances beyond the control of the lessee” loophole. (42 U.S.C. 6506a(i)).
• Requiring a detailed report on the use of onshore and offshore royalty relief

Limiting Transportation Allowances

Producers are also eligible to apply certain deductions before royalty is charged on the value of oil and gas produced. Currently, operators can reduce their royalty value by up to 50% for transportation of oil and gas production and up to 66.67% for processing costs of gas production.

Over the last decade, 2015-2024, companies reduced their royalty payments by $5.9 billion by claiming transportation and processing allowances on federal lands and waters. If both allowances were maximized, operators could bring a 12.5% royalty rate down to an effective rate of just 2.08%. Allowing companies to deduct these well-known and expected costs before being charged a royalty shortchanges American taxpayers.

The “Taxpayer Relief from Big Oil Act” would set a maximum transportation allowances of 30% or the “actual and reasonable” costs, whichever is lower.

Updating Inadequate Penalties

Fair implementation and oversight of our leasing system is necessary to ensure taxpayers receive a fair return and are not left with long-term liabilities. Yet the penalties for violating agreed upon lease terms are woefully outdated—several have not even been adjusted for inflation since their creation in the 1970s and 80s. These inadequate deterrents incentivize a few bad actors while doing little to encourage and reward responsible developers.

The “Penalties for Polluters Act” would update the following penalties and create a Penalty Revenue Reinvestment Fund for “excess revenue” (additional money that is now collected thanks to update), with 50% going to the states and 50% to penalty enforcement.