Washington, DC – Today Taxpayers for Common Sense released a new report entitled “Giving it Away: How Utah Loses from Oil and Gas Development on Federal Lands.” The new analysis finds that the state and federal taxpayers have lost in excess of $1.4 billion in revenue over the last decade because of below-market royalty rates, outdated rental rates, and natural gas waste from oil and gas wells.
Giving it Away examines federal oil and gas leasing practices in Utah under the Department of the Interior’s (DOI’s) Bureau of Land Management (BLM). The policies BLM applies to oil and gas leases on federal lands in Utah have a dramatic impact on the fiscal return for both federal taxpayers, and state taxpayers who receive roughly half of all natural resource receipts.
“Utah taxpayers have lost millions of dollars in valuable revenue because of outdated and inefficient federal oil and gas leasing policies,” said Ms. Ryan Alexander, president, of the watchdog group. “That’s real money and it’s time to take a look at the policies causing these tremendous losses year after year.”
BLM manages the nation’s oil and gas reserves and must by law collect fair market value from their development and sale. Giving it Away, 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ensure a fair market value for these resources because its land management policies are fiscally irresponsible and outdated.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 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 16.67 percent charged by the State of Utah for drilling on state lands, and far less than 18.75 percent the federal government charges for offshore drilling. The budget watchdog group estimates DOI could have collected $1.4 billion more from 2008 to 2017 by applying the 18.75 percent royalty rate currently applied to federal offshore oil and gas to the same quantity of production from Utah.
“The state of Utah charges a higher royalty. Offshore leasing pays a higher royalty. It’s time the Department of Interior steps up and does the same to benefit federal and state taxpayers.”
The report also draws attention to the 6.4 billion cubic feet of natural gas wasted during production operations on federal lands in Utah over the last decade. That gas, which is mostly methane, was worth an estimated $3.2 million. Yet DOI reports that only $15,000 in royalties was collected on it.
Giving it Away also examines 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 $64 million more in revenue from Utah leases over the last decade.
Additionally, the report finds that federal oil and gas parcels in the state of Utah are being leased for rock bottom prices. Over the ten-year period 2009-2018, half of all federal lands in Utah were leased at or below $10 per acre, and 25 percent of all leases were sold for $2 per acre. Two dollars per acre being the minimum amount the BLM can accept under current law.
“It is outrageous that oil and gas leases are being acquired by the acre for the price of a cup of coffee. And in some ridiculous cases, the government just gives it away for no bid at all. 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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