In early March, the Senate Energy Natural Resources (ENR) Committee met to hear testimony from Department of the Interior (DOI) Secretary Ken Salazar, and discuss the Department’s fiscal year 2011 budget request. Overall, the budget request is a $750 million decrease from FY 2010, and includes more funding for national parks and the Land and Water Conservation Fund.  While much of the hearing was devoted to DOI’s projects in each Senator’s state, new subsidy cuts for the oil and gas industry were also a major topic of discussion. 

Senators on the Committee raised questions concerning fossil fuel production and revenues from public lands.  Chairman Bingaman (D-NM) asked how savings from the president’s proposed termination of Abandoned Mine Lands Payments to Certified States, which is funded by revenues collected from coal mines, would be spent. Under current policy, states automatically receive federal funds for coal mine cleanup on public land, even if cleanup is complete. Ending payments to states that have certified cleanup completion would save taxpayers $1.24 billion from 2011-2020, which Secretary Salazar said would likely be used towards deficit reduction.

For Ranking Member Murkowski (R-AK) a top concern was that the Administration is moving forward with plans for leasing lands in the National Petroleum Reserve , which covers 23 million acres of public land in Alaska. Secretary Salazar confirmed that DOI plans to move forward with leasing the land to the National Petrochemical and Refiners Association (NPRA).  The National Petroleum Reserve received a $3 million budget increase from FY 2009-FY 2010 to $23.6 million, and the president’s FY 2011 budget request would maintain this level of funding. Guidelines for leasing in the Petroleum Reserve allow royalties to be determined on a case-by-case basis and stipulate that rent must be at least $3 per acre.

Continuing the discussion on fossil fuels, much of the hearing focused on President Obama’s proposed subsidy eliminations for the oil and gas industry. The Administration has proposed eliminating eight tax preferences and the oil research and development program for a total taxpayer savings of $36.7 billion from 2011-2020. Some Senators voiced concerns that these proposed eliminations would have a negative impact on the oil and gas industry. Ranking Member Murkowski argued that the proposed changes aren’t green because they won’t reduce our dependence on foreign oil. Secretary Salazar suggested that the Administration has a comprehensive energy strategy, investing in renewable energy while reducing dependence on fossil fuels. Senator Barrasso (R-WY) also expressed concerns with the cuts and asked if these new taxes will stimulate the economy. Secretary Salazar responded that they could, because current law has caused 50% of lease applications to be stuck in litigation and the new policy would make leasing more transparent. Secretary Salazar also added that current law is outdated, oil and gas companies are making huge profits and “taxpayers must receive a fair return” for drilling on public land. In response to a question from Senator Udall (D-CO) Secretary Salazar also said that the new fees “won’t put anyone out of business.”

While it is clear the debate on reforming oil and gas policies and enacting the FY2011 budget request cuts will be an uphill battle, there is light at the end of the tunnel for taxpayers. Secretary Salazar reiterated the Administration’s commitment to ensuring a fair return for taxpayers and emphasized that the well-established profitable oil and gas industry can afford to fairly compensate the federal government for publically owned natural resources.

Since 1918, the oil and gas industry has received more than $300 billion in taxpayer subsidies. It’s time to end this outdated policy and stop the giveaways. We urge the Administration to stand by these needed subsidy eliminations and encourage Congress to retain them through the appropriations process.

For more information, please contact Autumn Hanna at (202) 546-8500 x112 or autumn [at] taxpayer.net.