Significant volumes of federal gas are being wasted every year at a cost of millions of dollars to the federal taxpayers. This became immediately apparent when Taxpayers for Common Sense recently analyzed the amount of natural gas that drilling companies are allowed to burn or vent without paying any royalty charges. Federal agencies are in the process of updating a 40-year-old rule on drilling for oil and gas, and it is a good opportunity to ensure a fair return to taxpayers.

Companies that drill for natural gas pay the landowner a royalty on the gas they extract. On federal lands, drilling operators are allowed to use the gas they remove from deposits as fuel for their drilling rigs and other equipment on the well, for free. They are also allowed to flare (burn) or vent (release) publicly-owned gas from wells for free, with prior approval, essentially wasting it. Royalties provide valuable revenue for the federal coffers, but millions more should be collected for taxpayer-owned resources used and wasted by industry.

Operators on federal land in South Dakota, for example, reported a total of 13.0 billion cubic feet of gas approved for flaring by the Bureau of Land Management from 2006 to 2013, almost seven times the volume of gas reported as sold by federal lease holders (1.9 billion cubic feet) in the state during this period. In 2013, the total volume of flared gas in South Dakota was more than 16 times greater than the total volume sold in the state.

Operators in North Dakota reported flaring and venting a total of 26.6 billion cubic feet of gas from 2006 through 2013, equal to one-third the amount of gas federal lease holders reported selling during this period. According to the American Gas Association, “1 billion cubic feet (Bcf) of natural gas is enough to meet the needs of approximately 10,000-11,000 American homes for one year.” This means drilling operators on federal land in North Dakota wasted enough gas during this period to power roughly every household in the state for a year.

The total volume of gas that the Bureau of Land Management approved for venting directly into the atmosphere increased from 2.1 billion cubic feet in 2006 to 4.9 billion cubic feet in 2013, an increase of more than 130 percent. New Mexico accounted for almost the entire increase, going from 102.9 million cubic feet of gas vented in 2006 to 4.3 billion cubic feet in 2013, an increase of over 4,000 percent. New Mexico oil and gas companies wasted or used as fuel enough free gas from public land to supply all of the households in the state for four years.

Anecdotal reports suggest that this excessive authorized venting and flaring may be, in part, the result from the lack of infrastructure in the region to move federal gas from the well to markets. The industry says the Bureau of Land Management is to blame for excessive waste of gas because of the slow process of permitting gathering lines. Neither is an acceptable explanation. More federal gas being lost than is sold in some states is an irresponsible waste of taxpayer-owned resources.

At Taxpayers for Common Sense, we started looking at this issue because of the immediate losses in revenue. (A concern we have about other uses of public lands, from grazing to hardrock mining.) But there are also problems with the potential long-term liabilities created by methane venting and flaring. Methane is the principle component of natural gas. As an energy source, it burns much cleaner than oil or coal, but released directly into the atmosphere, methane is a potent greenhouse gas. So on top of not charging a royalty for methane vented and flared, we are creating additional taxpayer liabilities from its impact on the climate down the road.

The Department of the Interior has an opportunity to change the system to eliminate, or at a minimum drastically reduce, the wasted methane from current oil and gas operations. Natural resource royalties are an important source of revenue, and allowing the waste we see right now is simply inexcusable.