06.19.15

Grijalva, Lowenthal Call for Increased Onshore Oil and Gas Royalty and Rental Rates, Stronger Civil Penalties and Bonding Standards

Washington, D.C. – Ranking Member Raúl M. Grijalva (D-Ariz.) and Energy and Mineral Resources Subcommittee Ranking Member Alan S. Lowenthal (D-Calif.) today sent a letter to the Bureau of Land Management (BLM) urging increased royalty rates for onshore oil and gas production. The letter, a response to the Advance Notice of Proposed Rulemaking on royalty and rental rates published April 21, also calls for updating civil penalties for lease term violations and more stringent bonding requirements to avoid taxpayer-funded cleanups in case of bankruptcy.

BLM regulations set the maximum onshore oil and gas royalty rate at 12.5 percent – the minimum allowable under the Mineral Leasing Act. The regulations for offshore leases, in contrast, provide the flexibility to change royalty rates for each sale, which allowed the Bush administration to raise those to 18.75 percent, where they stand today. Onshore rental rates, which allow companies to hold the rights to drill on federal land for as little as $1.50 an acre, have not been changed in nearly 30 years.

The letter points out that bonding levels “have not been updated since the Eisenhower Administration, are woefully insufficient, and put taxpayers at a significant and ongoing risk of having to clean up improperly abandoned wells.”

“Ensuring a fair return to the American taxpayer for the extraction of their resources from public lands is one of the most critical stewardship tasks of the Bureau of Land Management,” the Members write to BLM Director Neil Kornze. “We strongly believe that minimum oil and gas royalty rates should be increased from 12.5 percent to 18.75 percent, the same rate for offshore leases, and the regulations should provide flexibility for higher royalty rates to be charged on individual lease sales without having to go through a full regulatory process, as is the case with offshore leases.”

The letter is available at http://1.usa.gov/1GmY7iG. The comment period ends today.