Report: Taxpayers Lost $4B Due to Low Royalty, Lease Rates

In The News, ReportReport: Taxpayers Lost $4B Due to Low Royalty, Lease Rates

This article by Eric Galatas first appeared in Public News Service on October 1, 2020

CHEYENNE, Wyo. — The Bureau of Land Management is failing to ensure taxpayers receive a fair market value for oil and gas deposits on federal lands, according to a new report.

Autumn Hanna, vice president of Taxpayers for Common Sense, said due to outdated and poor land-management policies, over the past decade U.S. taxpayers lost at least $4 billion, with $2 billion in lost state revenues in Wyoming alone.

“These are federally owned assets,” Hanna explained. “And we should be getting the most for them. We should be having competitive bidding, we should have royalty rates that keep pace, we should have inflation-adjusted rental rates and minimum bidding. We shouldn’t be just giving away the things we own.”

Hanna said royalty rates for oil and gas extraction have not been updated since 1920, and annual rental rates and minimum bid prices for leases have not changed in more than 30 years.

Some leases are granted with zero minimum bid.

Industry groups argue developers won’t explore new fields with higher costs, and dealing with government bureaucracy creates additional costs compared with leases on privately-owned lands.

Hanna said it’s in the best interest of producers to push for the lowest rates possible, but it’s up to the Interior Department to get a fair return based on market value.

“It’s the federal government’s job to protect taxpayers, and to ensure that we’re getting fair return for all the resources we own,” Hanna contended. “It’s not in the interest of the taxpayer for them to be representing industry during the leasing process. We need to be strategic about the resources we own, and leasing them competitively.”

In 2019, 40% of all leases sold at auction had bids of $10 an acre or less. Hanna said during the pandemic, royalty rates have been adjusted down to near zero. Seventy percent of all leases granted COVID-19 royalty relief were in Wyoming.

“Four hundred leases in the state of Wyoming, all that applied, were reduced to a half of a percent,” Hanna added. “It’s basically giving away the oil and gas that federal taxpayers own. This is not going to help when the state and local budgets are in dire need of more revenue.”

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