Washington, DC – Oil and gas companies have avoided paying more than $1.3 billion to taxpayers over the last decade for the right to drill on federal lands in Colorado, according to budget watchdog group Taxpayers for Common Sense. Below-market royalty rates, outdated rental rates, and natural gas waste from oil and gas wells are to blame, says the group in its report, “Losing on Leasing: How Colorado Loses from Oil and Gas Development on Federal Lands.”
Half of all proceeds collected by the federal government for drilling on federal land goes to the state where the land is located, meaning Coloradans have lost more than $600 million over the last decade thanks to lax policies by the federal Bureau of Land Management (BLM).
“Colorado taxpayers have lost hundreds of millions of dollars because of outdated federal policies,” said Ms. Ryan Alexander, president, of the watchdog group. “That’s real money and it’s past time to make changes to stop these tremendous losses year after year.”
The largest source of lost revenue, according to the analysis, is the low royalty rate BLM charges producers for developing oil and gas on federal lands. Oil and gas companies pay royalties on the minerals they remove from private, state, or federal lands to compensate the owner of these resources. At 12.5 percent, the federal royalty rate, set in 1920, is less than the 18.75 percent the federal government charges for offshore drilling, and far less than the 20 percent charged by the State of Colorado for new drilling on state lands. The budget watchdog group estimates federal agencies could have collected $1.3 billion more from 2009 to 2018 if it had been charging the 18.75 percent royalty rate it applies to federal offshore drilling.
“The state of Colorado charges a higher royalty. Offshore leases pay a higher royalty. It’s time for the BLM to bring its policies into the 21st century,” said Alexander.
The groups also points to the 3.9 billion cubic feet of natural gas wasted by companies during drilling over the last decade. That gas, which is mostly methane, was worth an estimated $14.8 million, but the feds collected only $26,800 in royalties on it, an effective royalty rate of 0.2 percent.
Losing on Leasing also examines rental rates, which also have remained unchanged for decades. It finds that if the rent for federal leases established in 1987 had simply been indexed to inflation, taxpayers would have received $38.5 million more in revenue from Colorado leases over the last decade.
Additionally, the report finds that federal oil and gas parcels in the Colorado are being leased for rock bottom prices. In fiscal year 2019, more than half of the leases in the state sold for $10 per acre or less and more than one-third sold for just $2 per acre – the minimum the BLM can legally accept.
“It is outrageous that oil and gas companies can lease federal land for the price of a cup of coffee. In the face of an exploding deficit, our country can no longer afford to give away the store to oil and gas companies,” 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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