This week, the Royalty Policy Committee, which was established to advise the Department of the Interior on natural resources management, is meeting in Albuquerque, New Mexico. President of Taxpayers for Common Sense, Ryan Alexander, is on the ground and speaking before local and national press on how federal energy policy should better protect taxpayers. Her statement highlights the large amount of natural gas lost during energy production on federal lands in New Mexico, and other concerns the Royalty Policy Committee should address. It can be read in full below:
Good afternoon. The organization I lead, Taxpayers for Common Sense, is a national, non-partisan budget watchdog. Our mission at TCS is to achieve a government that spends taxpayer dollars responsibly and operates within its means.
For more than two decades, TCS has worked to ensure that all taxpayers receive a fair return on natural resources extracted from taxpayer-owned lands and waters. Royalties and fees collected from resource development are a valuable source of federal income and should be collected, managed, and accounted for in a fair and accurate manner. As the resource owners, taxpayers have the right to fair market compensation for the assets extracted from our lands and waters – as would any private landowner.
However, over the last several decades, taxpayers have lost billions of dollars in revenue to a complicated leasing and royalty collection system that frequently undervalues our natural resources and keeps decisions and information from public view.
In a June 2017 report, the Government Accountability Office stated that since 2011, it has considered the Department of the Interior’s “management of federal oil and gas resources as a high-risk area vulnerable to fraud, waste, abuse and mismanagement.”
In the face of these longstanding, persistent problems at Interior, my organization was pleased when Secretary Zinke announced the formation of the Royalty Policy Committee. The Secretary’s charge for the committee was to ensure that the public receives the full value of the natural resources produced from Federal lands and waters. We were hopeful. We believed the committee would include a taxpayer voice. (I even put my name forward.) Unfortunately, when the members were announced last fall we saw a committee well-represented with energy industry interests but lacking an independent taxpayer voice.
Since last fall the RPC has met twice – once in Washington, DC and once in Houston. I attended both meetings. Unfortunately, what I heard at the meetings and have seen from the limited information available from the many closed-door breakout meetings, is a Committee that reflects its composition. The recommendations to date are overwhelmingly focused on making the royalty system more favorable to industry rather than on increasing value for the taxpayer.
Two significant areas of concern are royalty-free natural gas that is lost on federal land, and undervaluation of federal coal.
My organization has documented a dramatic increase in leaked, vented, or flared natural gas over the last decade – in 2015, oil and gas operators reported losing 36 billion cubic feet on federal land, more than three times what was lost in 2006. And by the Bureau of Land Management’s admission, those volumes are under-reported. Here in New Mexico, more lost gas was recorded than in any other state – 81 bcf over the last decade, worth an estimated $440 million dollars. According to our recent analysis of data from the Office of Natural Resources Revenue, taxpayers received no royalties for roughly 90% of the natural gas vented or flared on all federal lands in the last decade. We have not seen the RPC address this issue yet.
When it comes to federal coal, taxpayers are also losing out on valuable royalties, while the RPC turns a blind eye. Last year, ONRR repealed a 2016 rulemaking regarding the valuation of federal oil, gas, and coal resources, which was the result of a five-year process. The rule was imperfect, but it would have corrected many problems in the current system; repealing it reduced royalty collections. The RPC recommendations on valuation reflect industry’s concerns exactly. By exactly, I mean verbatim – the justification for the valuation recommendations include a section that is word for word the same as a set of industry comments.
When the RPC meets this week here in Albuquerque we hope there will be some discussion of these important issues and serious efforts to create a transparent and accountable royalty collection system that provides taxpayers a fair return on the resources we all own. Taxpayers can’t afford anything less.