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WAPO: Oil companies are drilling on public land for the price of a cup of coffee.
https://www.washingtonpost.com/posteverything/wp/2015/06/16/oil-companies-are-drilling-on-public-land-for-the-price-of-a-cup-of-coffee-heres-why-that-should-change/
Oil companies are drilling on public land for the price of a cup of coffee. Here’s why that should change.
Renting public land to some of the wealthiest corporations in the world for as little as $1.50 an acre per year is irrational.
By Jayni Foley Hein
June 16, 2015
Jayni Foley Hein is the policy director at the Institute for Policy Integrity at NYU School of Law. She recently authored a report on federal natural resources leasing, here http://policyintegrity.org/publications/detail/harmonizing-preservation-and-production/
One of the U.S. government’s largest sources of non-tax revenue comes from the land it leases to oil, gas and coal companies. Last fiscal year, the federal government generated more than $13 billion from drilling and mining activities on its land – but it should have made hundreds of millions of dollars more. Antiquated pricing rules have given these energy companies access to federal lands at prices that ignore decades of inflation, as well as many environmental and health costs of fossil fuel production.
Even as the average annual price for oil produced in the United States tripled in a decade, the minimum price the federal government charged for leases remained stagnant. In fact, for decades, the minimum bid to lease public land for fossil fuel production has been just $2 an acre. Annual rental fees, which companies pay to hold and explore federal lands before production, are just as low. And the royalty rate for oil and gas produced onshore has remained at just 12.5 percent since 1920. Those bargain prices give private companies a windfall while depriving American taxpayers of a fair return from energy production. Instead, the public has been left to pay for many of the social and environmental costs of fossil fuel operations, from road damage to respiratory problems.
The public’s share of the revenue from domestic energy production is held down by an outdated fiscal system managed by the Interior Department, which oversees oil and gas development on federal land. The department does not regularly evaluate or update the fiscal terms for its oil, gas and coal leases. This longstanding issue has become more pronounced as hydraulic fracturing, commonly known as “fracking,” has caused domestic energy production to soar, increasing its potential to become an even larger source of revenue for federal and state governments. Although fossil fuel production on federal lands has declined in recent years, oil, gas and coal from public lands – including offshore leases – still account for 25 percent of total U.S. fossil fuel production. Coal production on federal lands, alone, accounts for 40 percent of the U.S. total.
While the $2 minimum bid for federally auctioned oil and gas leases is only the starting price, about 40 percent of existing leases were sold at that level. Further, annual rental fees for onshore oil and gas leases – $1.50 per acre during the first five years and $2 per acre each year thereafter – allow drilling companies to hold and explore mineral leases for the price of a cup of coffee.
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Oil companies are drilling on public land for the price of a cup of coffee. Here’s why that should change.
Renting public land to some of the wealthiest corporations in the world for as little as $1.50 an acre per year is irrational.
By Jayni Foley Hein
June 16, 2015
Jayni Foley Hein is the policy director at the Institute for Policy Integrity at NYU School of Law. She recently authored a report on federal natural resources leasing, here http://policyintegrity.org/publications/detail/harmonizing-preservation-and-production/
One of the U.S. government’s largest sources of non-tax revenue comes from the land it leases to oil, gas and coal companies. Last fiscal year, the federal government generated more than $13 billion from drilling and mining activities on its land – but it should have made hundreds of millions of dollars more. Antiquated pricing rules have given these energy companies access to federal lands at prices that ignore decades of inflation, as well as many environmental and health costs of fossil fuel production.
Even as the average annual price for oil produced in the United States tripled in a decade, the minimum price the federal government charged for leases remained stagnant. In fact, for decades, the minimum bid to lease public land for fossil fuel production has been just $2 an acre. Annual rental fees, which companies pay to hold and explore federal lands before production, are just as low. And the royalty rate for oil and gas produced onshore has remained at just 12.5 percent since 1920. Those bargain prices give private companies a windfall while depriving American taxpayers of a fair return from energy production. Instead, the public has been left to pay for many of the social and environmental costs of fossil fuel operations, from road damage to respiratory problems.
The public’s share of the revenue from domestic energy production is held down by an outdated fiscal system managed by the Interior Department, which oversees oil and gas development on federal land. The department does not regularly evaluate or update the fiscal terms for its oil, gas and coal leases. This longstanding issue has become more pronounced as hydraulic fracturing, commonly known as “fracking,” has caused domestic energy production to soar, increasing its potential to become an even larger source of revenue for federal and state governments. Although fossil fuel production on federal lands has declined in recent years, oil, gas and coal from public lands – including offshore leases – still account for 25 percent of total U.S. fossil fuel production. Coal production on federal lands, alone, accounts for 40 percent of the U.S. total.
While the $2 minimum bid for federally auctioned oil and gas leases is only the starting price, about 40 percent of existing leases were sold at that level. Further, annual rental fees for onshore oil and gas leases – $1.50 per acre during the first five years and $2 per acre each year thereafter – allow drilling companies to hold and explore mineral leases for the price of a cup of coffee.
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