Federal government has ample supply and lower royalty rates, yet the industry still avoids public lands and American taxpayers are missing out. DOI needs to get to the bottom of it.
WASHINGTON DC (April 15, 2021) – The Institute for Energy Research (IER) has released formal comments for the so-called “energy review” by the U.S. Department of Interior (DOI) of the Federal Oil & Gas Leasing Program called for by Executive Order 14008.
As highlighted in the formal comments, the federal government owns 61% of the mineral estate of the United States, yet produces only 12% of the natural gas and 22% of the oil which benefit the nation. While some have suggested raising royalty rates on federal lands as a just, fair, or more equitable solution, IER’s comments highlight that energy producers are already running away from federal lands – why create even more disincentives with higher rates?
It is incumbent on the DOI to understand why – with ample energy supplies and lower royalty rates – American companies have steered their projects towards state and private lands. If the federal government wishes to ensure a fair return to the American taxpayers, the DOI needs to streamline and modernize the regulatory environment on federal lands. The current process imposes a massive cost to the American public in the form of dramatically reduced production and economic activity as well as the waste of complying with unnecessary and costly federal red tape.
By increasing the productivity of federal lands, the DOI could help ensure that U.S. dependency upon foreign nations for our energy does not increase, and that wealth will be created for citizens here, rather than exporting those jobs to China, or Russia, or the Democratic Republic of the Congo. Any attempts to make it harder for Americans to produce energy in America only aids and abets a growing dependence upon unreliable sources from around the world whose workers labor in sometimes horrible conditions to produce essential components for “green energy” sources.
Increasing the government’s share of energy production would benefit our national security, expand the opportunities for a just and equitable energy future, increase revenues at the federal level, and increase employment in locales where federal lands hold promise for energy production. States could increase spending on essential schools and roads and infrastructure, while providing opportunities for young people to secure good jobs in and around their communities.
We encourage the department to examine the numbers, be open-minded about what works successfully in our states, and move to adopt those same policies at the federal level.
Kenny Stein, IER’s Director of Policy issued the following statement along with submission of the organization’s public comments:
“Finding common ground in Washington is tough these days, but we agree with President Biden and Interior Secretary Deb Haaland that the federal oil and gas leasing system is broken, and the American taxpayer is missing out. But the answer isn’t raising royalty rates, it’s fixing the system. If the Department of the Interior was interested in a real fix, they would modernize the permitting process to try and match the success taking place on state and private lands, thereby attracting investment and a willingness to pay more for the right to drill. The department needs to offer more carrots, not sticks.
“Developing America’s energy resources on federal lands is unnecessarily cumbersome, unattractive and more trouble than it’s worth when you add up all the expensive, duplicative and unneeded red tape. So, let’s fix it together. Let’s make federal lands as attractive as private lands and let American taxpayers reap the financial and energy rewards.”
- Federal oil and gas acreage production that benefits Americans lags far behind its counterpart State and private lands.
- The federal government owns 61% of the combined land and water acreage of the United States, with states and private landowners owning 39%. Federal acres are producing much less energy, fewer jobs and less economic benefits than other lands.
- Federal production makes up just 12% of the nation’s natural gas and 22% of the oil produced.
- Federal onshore lands under lease declined by 46% from FY 2008 to FY 2018, according to the Bureau of Land Management’s “Acreage in Effect” Statistics, during which time domestic production of energy skyrocketed, allowing the U.S. to become the largest oil and gas producer in the world.
- Public land states where federal lands are predominantly located have significantly lower incomes than private land states – especially in rural areas where federal lands are generally located – and the federal government’s failure to make its energy leasing attractive for investment in exploration, development, production and transportation of federal energy resources robs lower income states of the traditionally high-paying jobs produced by the oil and gas and other extractive industries. In many cases, these jobs offer the best compensation, best benefits and best opportunities for advancement within such regions.
- Residents of states in which there are significant public lands also suffer from lower incomes than do other states. New Mexico, for example, benefits significantly from federal oil and gas leasing within its borders. The state’s highly diverse workforce and largely rural economy has enjoyed an economic renaissance because of the growth in oil and gas production on federal, state and private lands. Once economically moribund rural counties now can afford infrastructure in the form of schools and roads which were once unthinkable.
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