Fair returns from public lands must be on the table during oil export debate

With skyrocketing domestic oil and natural gas production, policymakers in Washington, D.C. are debating the merits of loosening restrictions on crude oil and natural gas exports – a proposal that has garnered support from both sides of the aisle.

But any serious consideration of increased energy exports needs to address a larger question: Is the federal government ensuring Americans receive a fair share from the modern day energy boom? The answer to that question is currently a resounding no, particularly on our nation’s hundreds of millions of acres of federal public lands.

{mosads}For many, mention of public land evokes images of Utah’s red rock canyons, Colorado’s high peaks and Oregon’s impressive forests. But federal public lands also encompass 700 million acres of subsurface oil, natural gas and other minerals.

The federal government is responsible for managing these public energy resources on behalf of all Americans, and we benefit financially from these resources in a few key ways. First, oil and gas companies pay rents and royalties for access to public energy reserves; these represent one of our government’s largest nontax sources of revenue. And secondly, the oil and gas produced from federal lands reduces our dependence on foreign energy.

Here’s the problem: oil and gas companies currently pay very little for the right to drill on federal lands. If we’re going to send more-and-more oil and natural gas overseas, then we also need to reform rental and royalty rates on onshore public lands in order to make sure taxpayers get a fair return.

Right now, oil and gas companies are charged only $1.50 per acre annually – less than the cost of a cup of coffee – to rent public lands for drilling. Additionally, they pay a royalty rate of 12.5 percent, which has not been updated since the 1920s. For comparison, Western states charge companies between 16.67 percent and 25 percent to extract oil and gas on state-owned lands.

According to President Obama’s proposed budget, reforming rental and royalty rates on public lands would generate an additional $2.5 billion in net revenue to the U.S. Treasury over the next decade. These critical funds can help to pay down our national debt.

Reforms would also generate hundreds of millions of dollars for Western states, which share in the financial gains from oil and gas development on public lands. These are critical funds that help mitigate the impacts of drilling to communities.

Luckily, reforming royalty and rental rates for oil and natural gas drilling on public lands is simple—Interior Secretary Sally Jewell and her Bureau of Land Management could accomplish it with a rulemaking. Forty-two members of Congress last month asked for this simple fix, but time is running out for this administration.

Even five years ago exporting American energy overseas was unthinkable. At that point, domestic oil production was on the decline, as it had been since President Richard Nixon was in the White House. Fast-forward a few short years and America’s energy fortunes have changed significantly.

Smart leaders from across the political spectrum are advocating for the federal government to loosen energy export restrictions. These are precisely the important debates that our elected officials should have. But they fall a pound short by debating the merits of exports while giving oil and gas companies a sweetheart deal on public lands.

Zimmerman is the policy director at the Denver-based Center for Western Priorities.

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