Editorial: Feds should take careful look at drilling royalties

In The NewsEditorial: Feds should take careful look at drilling royalties

This article first appeared in Albuquerque Journal on July 8, 2019

It’s time for the federal government to take another look at the onshore drilling royalties deal it struck with the energy industry a while back. And by “a while,” we mean 99 years.

According to the June 25 Journal, a Washington, D.C.-based advocacy group has issued a report claiming the Bureau of Land Management is vastly undercharging the oil and gas industry for production on federal lands. Industry operators producing on BLM land have paid the same 12.5% royalty rate since the approval of the Mineral Leasing Act in 1920.

That’s compared to the 18.75% the federal government charges offshore producers and the 20% New Mexico charges on state land.

Taxpayers for Common Sense estimates the mismatch has cost N.M. taxpayers – with our state’s large swaths of BLM land and massive oil and gas presence – about $2.5 billion in royalties from oil and gas operations on federal lands from 2009-18. And the group says an easy fix is to up that royalty level.

The Center for Western Priorities, which advocates for western states, argued for raising the rate to 16.67% in 2013. N.M.’s senior senator, Democrat Tom Udall, has argued in favor of raising the rate for years and says “this report makes clear that our completely antiquated leasing system hits states like New Mexico the hardest.”

House Resolution 3225 – whose four Democratic cosponsors include Rep. Diana DeGette of Colorado and Rep. Raul Grijalva of Arizona – would raise the onshore rate to 18.5%.

Whether that’s the right number is up for debate, though the disparity between the current federal and the offshore and state rates should be enough to give anyone pause. Industry is quick to point out the delays that come with BLM permitting and payment already make drilling on federal land less attractive, and given our state’s dependence on oil and gas revenues, we can’t afford to make it even less so.

In other words, our state and federal leaders should be sure to perform their own thorough and careful analysis beyond that of a few advocacy groups to find the sweet spot that delivers taxpayers and industry the best return on investment. While they’re at it, why not drill into the efficiency disparity between the state and BLM permitting and payment systems?

While this debate is playing out, it’s important to remember the role the energy industry plays in the lives of everyday New Mexicans. Another Journal story in the same edition notes the state’s cut of proceeds from the Permian Basin boom are even higher – $290 million to be exact – than originally anticipated for fiscal 2020. That’s money for everything from public schools to public roads to public retirement. And be it boom or bust, our state relies heavily on that revenue stream.

So this debate should not be a simplistic one about wringing every penny possible out of Big Energy. It needs to be about sensible updates that are right and what’s fair.

This editorial first appeared in the Albuquerque Journal. It was written by members of the editorial board and is unsigned as it represents the opinion of the newspaper rather than the writers.

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