Today Powder River Basin Resource Council joined with other stakeholders to file a petition requesting the Interior Department and Bureau of Land Management update how they manage oil and gas leasing on public lands to give a fair return to the American people and to comply with federal laws.
The signers are Dan Bucks, former director of the Montana Department of Revenue; the Powder River Basin Resource Council, a local citizens’ public interest group; individual councilmembers and ranchers Marjorie West and Leland Turner; and The Wilderness Society. The document emphasizes that the agencies are legally required to ensure that Americans receive fair market value for the natural resources found on and under public lands.
The petition also calls attention to legal requirements that the Interior Department manage public lands for many different uses, not just energy development. Despite these laws, drilling has historically often been prioritized on public lands.
Since January, this administration has been focused on regulatory rollbacks, so-called streamlining, and other shifts in policy that are moving the department even further toward an energy-above-all-else approach to public land and resource management—making the petition even more timely and critical.
The petitioners argue that the requested reforms won’t ultimately harm, slow, or stop energy production on public lands. They anticipate that the proposed changes will lead to oil and gas leases that are economically feasible to develop end up in the hands of diligent and competent producers of oil and gas, instead of being held unused by speculators, with no benefit to the American people.
The petition was submitted under the Administrative Procedure Act, which gives citizens the right to request action from a federal agency to issue, repeal, or amend a rule, and entitles them to a prompt response.
The problem: Companies tie up lands without producing energy or revenues.
The way Interior manages publicly owned resources provides hidden subsidies to oil and gas companies through at least seven specific avenues:
- Below-market royalty rates. Royalty rates are only 12.5 percent, far lower than state and private land rates.
- Below-market rent. Oil and gas producers pay only a dollar and change annually for each acre leased.
- Low minimum-lease bids. At just $2 per acre at a sale, these bids allow oil and gas companies to purchase and tie up lands they do not intend to use. A meaningful bid would incentivize purchases where companies intend to generate energy and revenue for the American taxpayer.
- Inadequate reclamation bonds. These bonds should provide funding for cleaning up the damage to public lands from oil and gas development, but the funds required are nowhere near sufficient.
- Lengthy and lax lease suspensions. Federal leases are issued for ten years—longer than most leases issued by states or private parties—so the industry already has ample time to develop leased lands. The current system is simply providing even more ways to extend leases without revenue or development.
- Leasing of low-potential lands. These lands are less likely to be developed.
- Unjustified reinstatements of lapsed leases. Even after leases are cancelled due to failures to pay rent, it is relatively easy for companies to get them put back in place through a “reinstatement” process, giving them another way to continue to benefit from public lands without either developing energy or providing a return to taxpayers.
Notably, these practices not only contribute to unfair compensation for the American public, but also tie up federal lands, often for decades—which means they’re neither being developed for energy nor managed for other uses that may be even more suitable for those lands, like conservation or recreation.
The solution: The government must charge market rates and discourage unproductive leasing.
The petition asks Interior to meet its legal obligations to manage public lands for multiple uses and ensure a fair return of revenues to the public in the following ways:
- Charging higher, market-tested royalty rates (such as those used by states and the private sector), instead of the inadequate 12.5 percent rate.
- Increasing rental rates on federal leases to a level sufficient to incentivize oil and gas production so that the percentage of federal leases that produce energy would rise well above the current, unsatisfactory levels (e.g., only 50 percent in the Rocky Mountain states).
- Increasing minimum lease bids, as recommended by the Congressional Budget Office, to deter companies from purchasing leases for speculative purposes only.
- Updating bonding requirements to reflect current costs associated with reclamation and restoration of lands used for oil and gas production.
- Reforming lease suspension practices to establish rigorous standards guaranteeing that undeveloped oil and gas leases are either diligently placed into production or cancelled so that the land can be managed for other beneficial uses.
- Updating lease reinstatement practices to require consistent and higher standards of justification for reinstating lapsed leases, with minimal tolerance for defaults on rental payments.
- Stopping the leasing of lands with low potential for oil and gas production and managing those lands for other purposes of greater benefit to the public.
The combination of these policies will generate millions of dollars annually for the American people, as well as states and local communities that benefit from federal oil and gas production. As numerous economic and fiscal studies indicate, higher royalty rates will generate large amounts of additional revenue with negligible impact on production. Indeed, several of the other changes proposed here will ultimately incentivize more timely production of oil and gas on federal lands, which raises the prospect for a net increase in energy production overall.
And with the adoption of these recommendations, federal lands will be used for more diverse purposes as the waste and neglect of lands with dormant, speculative leases decline. Better management of public lands will result in better uses in the right places, including renewable energy, recreation and conservation.
Quotes from petition signers and their representatives
Dan Bucks, former director, Montana Department of Revenue:
“The benefits to the American people of the policies we are asking Interior to adopt are clear and compelling. Our proposals would maintain oil and gas production on public lands where it makes sense, while generating greater revenues through a fair return of royalties to the American people. Where oil and gas does not make sense, the proposals would increase public benefits and bolster local and regional economies over the long-term through expanded recreation and tourism, renewable energy, conservation, and other sustainable activities.”
Christy Gerrits, board member, Powder River Basin Resource Council and retired school teacher, Gillette, Wyo.:
“These commonsense reforms are exactly what we need for our youth. They will generate funding for our schools, while also preserving more of our outdoors. Educators can provide their students countless hands-on lessons in science, archeology and history of Native Americans and pioneers on our public lands.”
Bob LeResche, Powder River Basin Resource Council Chair, former Alaska Commissioner of Natural Resources and former Executive Director of the Alaska Energy Authority:
“An important part of Interior’s charge to manage natural resources owned by all Americans is their proprietary duty to achieve a fair return when they lease or sell fossil fuels. It is high time that the government prioritizes revenues that benefit all citizens, improves their lax financial management, and stops selling oil and gas to corporate interests at below market prices.”
Nada Culver, senior counsel and director of the BLM Action Center, The Wilderness Society:
“Our leasing program is in desperate need of reform. With the current system, we are losing millions in revenue, not to mention access to public lands. Interior is legally obligated to fix this problem on behalf of the American people.”
Individual members of Powder River Basin Resource Council also on the petition
Marjorie West: Along with her husband, Bill, Marge owns a ranch on Spotted Horse Creek in the Powder River Basin of Wyoming, where they grow dry land wheat and raise cattle. Her ranch was homesteaded by Bill’s father and expanded by the family over the generations. The Wests’ ranch includes a combination of private and federal oil and gas, and the family has been living with the impacts of development of these resources since the coalbed methane boom in the early 2000s. Now that coalbed methane has busted, the Wests are dealing with idle and orphaned wells that have been left on their land.
Leland (L.J.) Turner: L.J. and his family own a 10,000-acre ranch near the town of Wright, Wyo., in the heart of the one of the largest oil and gas fields in the country. L.J.’s grandfather homesteaded the ranch in 1918, and it has been in the family ever since. The ranch currently has sheep and cattle, and is impacted by oil and gas development from a mix of privately owned and federally owned minerals.