Press Release

Stemming Lost Revenues…after 102 Years

Federal oil gas royalty rates may finally reflect market values

Energy & Natural Resources, | Statements and Press Releases

May 12, 2022 | 4 min read | Print Article

Stemming Lost Revenues…after 102 Years

Federal oil gas royalty rates may finally reflect market values

FOR IMMEDIATE RELEASE
May 12, 2022

American taxpayers lost as much as $13.1 billion in revenue from oil and gas drilling on federal lands during the last decade, according to a new report from budget watchdog group Taxpayers for Common Sense. This reflects the amount of revenue taxpayers would have received in royalty payments from oil and gas companies if the Department of the Interior had updated its royalty rates originally set in 1920.

The DOI recently announced its decision to temporarily increase onshore royalty rates to 18.75 percent from the 1920 rate of 12.5 percent in upcoming lease sales. Oil and gas drillers already pay 18.75 percent royalty on oil and gas removed from federal waters. The new report bolsters the case for DOI or Congress to make the 18.75 percent rate permanent for onshore leases.

TCS vice president Autumn Hanna said that “the modernized royalty rates will have little or no effect on oil and gas production and will bring in more revenue for taxpayers with a royalty rate similar to what many oil-rich states, including Texas, Louisiana and Oklahoma, have been charging for years.”

“For 102 years, oil and gas companies have been able to ’buy low and sell high’ on leases to drill on America’s public lands. These public lands, owned by all Americans and held in trust by the federal government, contain vast deposits of valuable oil and gas resources on millions of acres throughout the western United States,” continued Hanna.

Hanna called the new leasing royalty rates “long overdue,” adding that “valuable leases on public lands are being sold at laughably low prices based on rates and terms established up to a century ago. In effect, taxpayers have been subsidizing oil and gas companies operating on America’s public lands and their profits that they funnel back into shareholder portfolios.”

TCS revealed that because of this low royalty rate, lost (“foregone”) potential royalty revenue hit a record high of $2.3 billion in 2021 as oil prices skyrocketed. Not coincidentally, the top 20 companies in the U.S. oil and gas industry reported record profits of $73.6 billion in 2021.

Hanna concluded, “reforming the federal oil and gas system will benefit all taxpayers, grow our economy, and help us move towards more balanced energy development on public lands that belong to every American.”

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Taxpayers for Common Sense is a nonpartisan budget watchdog that has served as an independent voice for the American taxpayer since 1995. It works to ensure that taxpayer dollars are spent responsibly and that government operates within its means.

Background for Reporters:

For information on the federal government’s new oil and gas leasing royalty rates, see the new report Royally Losing II by Taxpayers for Common Sense.

For further background information on the oil and gas leasing process, here are some helpful reports: