04.19.16

CBO Report Shows Taxpayers Losing Out on Potentially $1.2 Billion in Oil & Gas Revenue

Washington, D.C. – The Congressional Budget Office (CBO) today released a report requested by Ranking Member Raúl M. Grijalva (D-Ariz.) and senior Democratic members of the House Natural Resources Committee on the potential revenue effects of reforming royalty rates and leasing rules for oil and gas on public lands and waters. The report examined eight options and concluded that the combined revenue impacts of the reforms could be $1.2 billion – over 10 years, with considerably greater revenues after that – and that this revenue could be gained without hurting production levels or opening up new sensitive areas to drilling.

“This report simply proves what we’ve been saying for a long time – the oil and gas industry is not paying their fair share to the American people for the development of public resources on public land,” Grijalva said. “It’s time to modernize our leasing and royalty systems, and enact commonsense reforms that would end the sweetheart deal the oil and gas industry is getting to drill on some in some of our most treasured places.”

“I am pleased to see that the non-partisan CBO has confirmed what we have long suspected – that the taxpayer has not been receiving a fair return for the private extraction of our public oil and gas resources,” Energy and Mineral Resources Subcommittee Ranking Member Alan Lowenthal (D-Calif.) said. “Today, states like Montana, Oklahoma, and North Dakota all charge a higher royalty rate for oil and gas produced on state lands than the federal government does for oil and gas produced on public lands - Texas even charges 25 percent. It is time to raise the outdated federal onshore royalty rate and provide the taxpayer $200 million more as the CBO report concludes.” 

The options examined included raising the antiquated minimum bids for onshore oil and gas leases, equalizing the royalty rate for onshore and offshore leases, allowing for higher royalty rates as the price of oil increases, among others. In 2008, the Government Accountability Office found that the proportion of money the U.S. receives from oil and gas development is among the lowest in the world, and recommended a comprehensive reassessment of the federal oil and gas fiscal system.

Earlier this year, Grijalva and Lowenthal introduced the Ensuring the Taxpayer a Fair Return for Federal Onshore Oil and Gas Resources Act (H.R. 4389), which would raise the onshore royalty rate from 12.5 percent to 18.75 percent. This is the rate oil and gas companies pay the government for removing and selling publicly owned oil or gas. An increase to 18.75 percent would bring the onshore rate in line with what the federal government currently charges companies for federal offshore production.

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