Washington, DC – Today Taxpayers for Common Sense released Gaming the System: How Federal Land Management in Nevada Fails Taxpayers. The report takes an in-depth look at federal oil and gas leasing practices in the state under the Department of Interior’s Bureau of Land Management (BLM).
BLM manages the nation’s oil and gas reserves and must by law collect fair market value from their development and sale. Gaming the System, however, finds that the agency is failing taxpayers – BLM doesn’t ensure a fair market value for these resources because its land management policies are fiscally irresponsible and outdated.
The vast majority of federal land in Nevada is leased through a noncompetitive process. In fact, Nevada accounted for 70% of all noncompetitive federal lease sales nationwide over the last decade. Between 2009 and 2018, the state of Nevada issued 1565 leases for oil and gas drilling covering 3.4 million acres of federal lands in the state. More than half of these leases were sold noncompetitively in an end run around the competitive leasing process.
Worse, these oil and gas leases yield minimal fiscal return and only a tiny fraction ever enter production – no lease issued since 2004 has entered production. So many fruitless federal leases raises the specter of rampant speculation on federal land.
“The findings are startling. Out of more than 22,000 leases only a handful went into production,” said Ms. Ryan Alexander, president of Taxpayers for Common Sense. “BLM is leasing out these lands for next to nothing under the guise of oil and gas production, but the reality is they aren’t producing squat, much less oil. Actually, squat is right term here, because that is what many of these leaseholders are effectively doing – squatting on the land and hoping to resell.”
This extensive use of the noncompetitive system has undermined competitive lease auctions in Nevada. According to the BLM Nevada state office, 34 competitive lease sales were held over the last decade (2009-2018). But companies often seemed to avoid the sales and opt to attain leases through day-after-sale noncompetitive leasing instead. BLM received nearly 300 noncompetitive offers on the days after lease sales. In total, more than 30% of the noncompetitive leases issued by the BLM stemmed from offers received the day after a competitive lease sale.
“Leasing is dramatically up from recent levels in Nevada under the Trump Administration,” continued Alexander, “but taxpayers have no reason to believe it’ll lead to more production or more revenue than a decade ago, or two decades ago.”
At the end of 2018, only 36 leases covering 24,400 acres in Nevada were considered producing leases. The newest among these leases was authorized in 1998. All but seven were authorized before 1976. The producing leases, furthermore, are owned by a relatively small group of companies.
Gaming the System also examined royalties, rents, and minimum bids which also have remained unchanged for decades. It finds that if the rent and minimum bid prices established by the Federal Onshore Oil and Gas Leasing Reform Act of 1987 had simply been indexed for inflation, taxpayers would have received $50 million more in revenue from Nevada leases over the last decade.
“Taxpayers lose from a broken oil and gas lease system. From the undervalued land, low royalty rates, minimum bids, and rental rates taxpayers lose 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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