Last weekend the Senate pulled an all-nighter to pass the Inflation Reduction Act of 2022 (IRA). The bill was the Democrat’s long-awaited fiscal year 2022 budget reconciliation measure that had been left for dead by the side of legislative road several times only to be suddenly revived in a surprise late July deal. The $740 billion bill addresses healthcare, tax reform, and climate change. While some of the larger provisions of the bill are rightly getting a lot of attention—including by us—a few long-awaited oil and gas leasing reforms flew under the radar. If the House passes the package as anticipated, these reforms will raise important revenue and get taxpayers a fairer return for the natural resources we all own.

The Department of the Interior leases federal land—the land we all own—for oil and gas development. However, the process for selling and managing federal onshore oil and gas leases is broken, outdated, and rife with subsidies, costing taxpayers tens of millions of dollars every year.

For decades, taxpayers have been losing money at every step of the process. Thankfully, the Reconciliation bill includes some much-needed reform to ensure taxpayers get a fair return on these valuable resources.

Since 1920 the oil and gas royalty rate on federal lands has seemingly been set in stone. Well protected by oil and gas interests, the 12.5 percent rate lagged states sometimes by more than 10 percent—Texas charges 25 percent, for instance. It’s also well below what we charge for offshore leases in federal waters—18.75 percent. Had an 18.75 percent royalty rate been applied to all oil and gas produced on federal lands over the past decade, taxpayers could’ve gotten up to $13.1 billion more in revenue.

The IRA would raise the onshore oil and gas royalty rates for all leases issued during the 10-year period following the enactment of this bill from 12.5% to 16.67%. This big win for taxpayers helps get us closer to a fair return on this valuable, taxpayer-owned resource.

Companies also take advantage of the $2 per acre minimum bid set more than 30 years ago. A minimum bid is what it sounds like—the minimum amount a company can bid to win a lease. Of the 544,000 acres sold at auction in 2020, roughly 200,000 received just the minimum bid.

The IRA would increase the oil and gas minimum bid from $2/acre to $10/acre for all leases issued during the 10-year period following the enactment of this bill.

Rental rates for holding federal land that is not producing oil and gas have also not been updated or adjusted for inflation since 1987. According to the Congressional Budget Office (CBO), increasing rental rates by $6 per acre would raise $400 million in revenue over 10 years.

And the IRA would do exactly that, raising oil and gas rental rates for all leases issued during the 10-year period following the enactment of this bill: $3/acre for the first 2 years; $5/acre for year 3-8; and then no less than $15/acre for year 9-10. Score another for taxpayers!

Another sweetheart deal for oil and gas interests is a noncompetitive leasing loophole that companies exploit to acquire oil and gas leases the day after auction without even paying taxpayers the measly $2 per acre minimum. In this way, speculators and other industry interests can lock up federal land for almost nothing.

Moreover, the ability to lease federal land noncompetitively provides an obvious incentive to not bid on a parcel during a lease auction. Why pay a bonus bid for the same lease terms for the same federal land if you don’t have to?

The Reconciliation bill would finally close this noncompetitive oil and gas leasing loophole. Lands that receive no bids would then be made available for a new round of competitive bidding. In fact, the IRA would even require companies to submit an expression of interest fee of $5/acre, to be adjusted every 4 years to reflect inflation. This will discourage companies from nominating lands for lease sales and then not bidding on them only to scoop them up the next day for next to nothing. And another one for taxpayers!

For the last several decades updates to these antiquated policies seemed all but impossible to get across the finish line. But all along the way several policymakers took up the mantle to call out these subsidies, and their efforts certainly brought attention to the need to enact these reforms. This includes the efforts of Senators Rosen (D-NV) and Grassley (R-IA) calling out the suite of oil and gas preferences that no other energy interest receives, to Senator Hickenlooper (D-CO) calling out the egregious practice of noncompetitive leasing. Senator Manchin (D-WV), who raised these important reforms in Senate Energy and Natural Resources hearings, also included them in his committee’s reconciliation package and made it clear repeatedly that letting updates to these rates lapse is an unfair advantage in the energy marketplace.

While getting these reforms across the finish line would be cause for celebration, we can’t help but pine for the ones that got away.  A provision that would raise oil and gas bonding minimums was included in the initial draft of the IRA but did not make it in the final Senate-passed bill, due to the limitations of what can be considered in reconciliation (no policy). Oil and gas bonding is used to cover the cost of cleaning up wells when the operators fail to do so. The minimums set in the 1950s and 1960s are insufficient to cover the full reclamation costs today, so taxpayers end up footing the bill. Another questionable move in the bill is tying wind and solar development to onshore oil and gas lease sales, which would hamper the best and most efficient uses of public lands.

For now, we will concentrate on the well-earned taxpayer wins in the package while working to get the rest of them. After a year and half winding towards passage the Senate has spoken. Now the fate of these long-awaited reforms is up to the House.