Washington, DC – Over the last decade, the Bureau of Land Management (BLM) has lost billions of dollars in revenue from oil and gas development in New Mexico because of outdated oil and gas leasing policies, according to a new report by Taxpayers for Common Sense released today.
The report, New Mexico’s Boom That Cost Billions: How Federal Oil & Gas Policies Fail Taxpayers, examines policies BLM applies to oil and gas leases on federal lands in New Mexico, and their fiscal return for both federal taxpayers, and New Mexicans, who receive roughly half of all natural resource receipts. In total, the report finds that federal taxpayers have lost more than $5.2 billion in revenue over the last decade because of outdated rental rates, below-market royalty rates, and natural gas waste from oil and gas wells.
“It is outrageous that outdated royalty rates lagging far behind other states have cost taxpayers billions of dollars in much needed revenue. These losses are particularly startling in New Mexico, which has more federal oil and gas production than any other state,” said Ms. Ryan Alexander, president of Taxpayers for Common Sense.
The largest source of lost revenue, according to the analysis, is the low percentage of sales value that the Department of the Interior (DOI) charges producers for developing oil and gas on behalf of taxpayers. At 12.5 percent, a rate set in 1920, the BLM royalty rate lags the 18.5-20 percent that New Mexico charges producers for oil and gas development on state lands. Using the royalty rate currently applied to federal offshore oil and gas sale, the budget watchdog group estimates DOI could have collected $5.2-$5.5 billion more over the last decade by applying an 18.75 percent royalty rate to the same quantity of production.
“Federal taxpayers are sick of being suckers. The going rates for developing oil and gas in offshore waters and on state lands in Texas, Oklahoma, Wyoming, and New Mexico are all higher than what BLM charges. We’re leaving money on the table, and no one benefits but the oil and gas industry,” continued Alexander.
The report also draws attention to the 86.6 billion cubic feet of natural gas wasted during production operations on federal lands in New Mexico over the last decade. That gas, which is mostly methane and was worth an estimated $320 million, was more than the amount lost on federal lands in any other state. Yet DOI reports that only $20 million in royalties was collected on it.
In 2016, the BLM finalized a rule to limit methane waste from federal lands and increase royalty collections on the lost gas. The rule was almost entirely rescinded by the BLM in September 2018. Using New Mexico state emissions data, Taxpayers for Common Sense found that emissions increased more than 10 percent in fiscal year (FY) 2018 after dropping in FY2016 and FY2017, yet DOI collected fewer royalties on gas waste. It’s the first evidence that the rescission of the BLM’s 2016 Methane Waste Rule will allow for more methane waste from federal lands without collecting more royalties on it.
Finally, the report assesses how much revenue DOI has lost because rental rates for federal oil and gas leases haven’t changed since 1987. If the rates had been indexed to inflation, taxpayers could have gained $19 million more than what DOI collected, according to the report. Because nearly half of all federal receipts from natural resource developments are shared with the state where they’re generated, the report estimates that New Mexicans could have received $2.5 billion more if not for BLM’s outdated rental rates, below-market royalty rates, and natural gas waste from oil and gas wells.
“This is a broken oil and gas leasing system that continues to cost taxpayers billions in revenue from the federal resources we all own,” concluded Alexander.
ABOUT: Taxpayers for Common Sense (TCS) is a nonpartisan budget watchdog that has served as an independent voice for the American taxpayer since 1995. TCS works to ensure that taxpayer dollars are spent responsibly and that government operates within its means.
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