House Dems' bill would double fees for lease bids, rentals

E&E News
Phil Taylor, E&E reporter
January 15, 2014

Seeking to ensure that the federal government keeps pace with inflation, a bill by House Democrats would double the fee charged to bid on or maintain oil and gas leases on public lands.

The bill by Rep. Alan Lowenthal (D-Calif.) would require companies to bid at least $4 instead of $2 for every acre they lease from the Bureau of Land Management. Fees to hold onto nonproducing leases would rise from $1.50 to $3 for newer leases and $2 to $4 for older leases.

The bill is co-sponsored by Reps. Peter DeFazio (D-Ore.), ranking member of the House Natural Resources Committee, and Rush Holt (D-N.J.), ranking member of the Subcommittee on Energy and Mineral Resources.

It's the latest bid by Democrats to ensure taxpayers receive a fair return on the use of public lands and to encourage swifter production of federal minerals. The Obama administration has long proposed establishing new fees on nonproducing leases but has been repeatedly rebuffed by Republicans in Congress.

The bill is unlikely to advance in the Republican-controlled Natural Resources Committee, where leaders have focused on reducing regulatory barriers they charge block domestic mineral production. They argue that production on federal lands has failed to keep pace with the surge on private lands, due largely to red tape.

But according to Lowenthal, raising bids and rentals is responsible fiscal policy.

The congressman's staff said the current $2-per-acre minimum bid for oil and gas leases was set in 1987 and, according to the Bureau of Labor Statistics, would come out to $4 in today's dollars.

The bill would also raise the $2-per-acre minimum bid for tar sands, which was last set in 1981, to $5.

It would also require Interior to adjust those fees every four years according to inflation.

According to staff, the Congressional Budget Office is not able to calculate how much additional funding the bill may produce, since the Interior secretary already has the discretion to raise minimum bids and rentals and could do so at any time.

The congressman does not believe the higher fees would deter investments.

As of May 2012, about 21 million acres of onshore oil and gas leases -- more than half -- were not undergoing exploration or production, according to an Interior report.

Democrats and conservationists argue that's a sign that industry complaints that Interior is dragging its feet on offering new lease sales are overblown.

But drilling companies argue that it takes significant time to acquire necessary lease acreage, capital and regulatory permits to develop a lease and that many leases, by their very nature, lack mineral deposits.

BLM has not indicated plans to raise minimum bids or rentals for oil and gas, but in recent years, Interior has tripled the minimum bid for deepwater leases in the Gulf of Mexico, citing a study that suggested deepwater leases purchased for less than $100 per acre rarely see exploration or development drilling.

According to Interior, nearly 72 percent of the 36 million acres of federal waters leased for oil and gas remain "idle," meaning they are neither producing nor currently subject to approved or pending exploration or development plans.