WASHINGTON, D.C. – Today, U.S. Senators Jacky Rosen (D-NV) and Chuck Grassley (R-IA) announced that they have sent a letter to U.S Department of the Interior Secretary Deb Haaland, urging the Department – which is in the midst of a comprehensive review of the federal oil and gas program – to include their bipartisan Fair Returns for Public Lands Act as a policy recommendation in their finalized report. The Senators’ legislation seeks to update the nation’s outdated public lands royalty system and ensure that taxpayers and rural communities get fair returns on leases of public lands for oil and gas production.
“As you know, the Department of the Interior’s rental and royalty rates for oil and gas drilling on federal lands have not been updated since 1920 and the minimum bid and rental rates have remained stagnant since 1987,” wrote the Senators. “As a result, taxpayers are not receiving fair market value for the commercial development of publicly-owned oil and gas resources. Our legislation would increase the royalty rate from 12.5 percent to 18.75 percent, which the Congressional Budget Office estimates would generate $200 million in net federal income over a 10-year period.”
“The Fair Returns for Public Lands Act can bring our federal leasing system into the 21st century and ensure that state and local governments across the nation receive fair compensation to fund critical education, infrastructure, and public health projects. We strongly urge you and the Department to consider this legislation and incorporate it in your recommendations to Congress to improve our federal oil and gas program,” the Senators’ letter continued.
BACKGROUND: One hundred years ago, Congress passed the Mineral Leasing Act of 1920, setting up a system in which companies could lease public lands to wrest valuable oil and gas from the ground. In the century since, the royalties and rent that those corporations pay to the American people for access have remained essentially unchanged even as the scale of development and profits has grown hugely.
The federal royalty rate for drilling in federal waters, at 18.75 percent, is 50 percent higher than it is on land. According to a 2015 study by the Center for Western Priorities, if the onshore federal royalty rate were the same as the 18.75 percent offshore rate, the U.S. government and the affected states would have collected up to $730 million annually in additional revenue.
In the 2019 fiscal year, the United States received $2.931 billion in royalties from onshore oil and gas production on federal lands. The overall value of those resources computes to $23.4 billion at a 12.5 percent royalty rate.
According to Taxpayers for Common Sense, due to outdated annual rental rate and minimum bid prices, taxpayers have lost more than $50 million in revenue in the state of Nevada over the last decade.
The Fair Returns for Public Lands Act would set a uniform federal royalty at 18.75 percent, applied to new oil and gas leases. The Congressional Budget Office estimated that this royalty would raise $200 million in federal revenue over the next 10 years, with an equivalent amount returned to the states where the oil or gas is being extracted. This bill will also increase the rates for reinstated oil and gas leases, which will discourage oil and gas developers from holding onto leases on public lands they do not intend to actually explore or develop.
Specifically, the Fair Returns for Public Lands Act would:
- Increase the royalty rate for oil and gas leases, from 12.5 percent to 18.75 percent.
- Increase the rental rate for oil and gas leases, from $1.50 per acre for the first five years and $2.00 per acre for the remainder of the lease, to $3.00 per acre for the first five years and $5.00 per acre for the remainder.
- Increase the national minimum bid for oil and gas leases, from $2.00 per acre to $10.00 per acre, with discretion for the Secretary of the Interior to set a higher minimum bid for individual lease sales or lease parcels as needed.
- Increase the rental and royalty rates for reinstated for oil and gas leases, by establishing a rental rate of $20 per acre and a royalty rate of 25 percent that applies uniformly to all reinstated leases.
- Establish a fee for expressions of interest, by requiring parties who wish to nominate public lands for oil and gas leasing to pay a fee sufficient to reimburse administrative costs of at least $15 per acre.
- Require regular adjustments, by directing the Secretary of the Interior to adjust these rates for inflation at least every four years, or earlier if necessary to enhance financial returns or promote more efficient management of oil and gas resources.
- Require a study, which must be completed in 3 to 5 years and will evaluate the efficacy of the Interior Department’s implementation of the bill.
The Fair Returns for Public Lands Act is endorsed by Center for Western Priorities, Coalition to Protect America’s National Parks, Conservation Colorado, Conservation Lands Foundation, Conservatives for Responsible Stewardship, Earthjustice, Earthworks, Friends of the Earth, Grand Canyon Trust, GreenLatinos, Hispanics Enjoying Camping, Hunting, and the Outdoors (HECHO), League of Conservation Voters, Montana Wilderness Association, National Parks Conservation Association, National Wildlife Federation, Natural Resources Defense Council, Nevada Conservation League, Nevada Wildlife Federation, New Mexico Voices for Children, New Mexico Wild, New Mexico Wildlife Federation, Publish What You Pay-US, Rocky Mountain Farmers Union, Sierra Club, Sierra Club Rio Grande Chapter, Taxpayers for Common Sense, The Wilderness Society, Vet Voice Foundation, Western Leaders Network, and the Western Organization of Resource Councils.
The Senators’ full letter can be found here and below:
Dear Secretary Haaland:
As the Department of the Interior conducts a comprehensive review of the federal oil and gas program, we urge you to include our bipartisan Fair Returns for Public Lands Act (S. 624) as a policy recommendation in your report this summer. Our bill would update the nation’s outdated public lands royalty system, and ensure that taxpayers and our rural communities get fair returns on leases of public lands for oil and gas production.
As you know, the Department of the Interior’s rental and royalty rates for oil and gas drilling on federal lands have not been updated since 1920 and the minimum bid and rental rates have remained stagnant since 1987. As a result, taxpayers are not receiving fair market value for the commercial development of publicly-owned oil and gas resources. Our legislation would increase the royalty rate from 12.5 percent to 18.75 percent, which the Congressional Budget Office estimates would generate $200 million in net federal income over a 10-year period. This increased rate would match existing royalty rates for offshore oil and gas leasing, as well as rates charged by states like Utah, Colorado, New Mexico, and Wyoming.
Our legislation would also make additional reforms, including:
- Increasing the rental rate for oil and gas leases, from $1.50 per acre for the first five years and $2.00 per acre for the remainder of the lease, to $3.00 per acre for the first five years and $5.00 per acre for the remainder.
- Increasing the national minimum bid for oil and gas leases, from $2.00 per acre to $10.00 per acre, with discretion for the Secretary of the Interior to set a higher minimum bid for individual lease sales or lease parcels as needed.
- Increasing the rental and royalty rates for reinstated oil and gas leases, by establishing a rental rate of $20 per acre and a royalty rate of 25 percent that applies uniformly to all reinstated leases.
- Establishing a fee for expressions of interest, by requiring parties who wish to nominate public lands for oil and gas leasing to pay a fee sufficient to reimburse administrative costs of at least $15 per acre.
- Requiring regular adjustments, by directing the Secretary of the Interior to adjust these rates for inflation at least every four years, or earlier if necessary to enhance financial returns or promote more efficient management of oil and gas resources.
- Requiring a study, which must be completed in 3 to 5 years and will evaluate the efficacy of the Interior Department’s implementation of the bill.
The Fair Returns for Public Lands Act can bring our federal leasing system into the 21st century and ensure that state and local governments across the nation receive fair compensation to fund critical education, infrastructure, and public health projects. We strongly urge you and the Department to consider this legislation and incorporate it in your recommendations to Congress to improve our federal oil and gas program.
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