We Can Reform the Broken Federal Oil and Gas Leasing System | Opinion

Last fall, the Department of the Interior (DOI) started announcing plans for a series of oil and gas lease sales that will be held throughout 2023. Nearly half a million acres of public lands in Nevada, Utah, Wyoming, New Mexico, Montana, North Dakota, Nebraska, Kansas, Michigan, Mississippi, and Louisiana will be open to bidding by industry beginning in May.

The problem? Right now, those lease sales are scheduled to be held under a leasing system that DOI has acknowledged is broken. In fact, even though DOI released a report recommending actionable, common-sense solutions for reforming the federal oil and gas program more than a year ago, the administration still hasn't initiated a long-overdue rulemaking process for following through on those recommendations.

For decades, the federal onshore leasing system has prioritized industry profit over taxpayers and all who use and cherish our nation's public lands, providing hefty benefits and subsidies to oil and gas interests at the expense of wildlife, clean air and water, and communities. But there are solutions readily available that have been waiting to be implemented—and that are more important now than ever, with new lease sales on the horizon. These solutions include measures passed by Congress and promised by the administration, like holding oil and gas companies responsible for the cost of cleaning up wells they drill on public lands.

The challenge is that DOI has been dragging its feet. But with preparations for new lease sales already underway, there is no time to waste. DOI must initiate its promised rulemaking to protect fair returns to taxpayers and guarantee better management of our public lands—before these sales are held.

Congress helped move the ball forward last summer, enacting a number of improvements to the fiscal rates and terms for leasing and development on public lands. For the first time ever, the onshore royalty rate was increased from 12.5 percent to 16.67 percent, bringing taxpayers closer to a fair return on the oil and gas resources we all own. For decades, taxpayers have lost out on billions in critical revenue from the oil and gas industry's development on public lands, and raising rates is an important step towards righting that wrong.

Los Angeles oil drilling
LOS ANGELES, CALIFORNIA - JANUARY 28: An oil pumpjack (L) operates as another (R) stands idle in the Inglewood Oil Field on January 28, 2022 in Los Angeles, California. The Los Angeles City Council voted to ban new oil and gas drilling as well as evaluating how to decommission existing wells in the city following years of complaints from residents. Thousands of Angelenos reside in close proximity to the more than 5,200 gas and oil wells in the city and many have complained about negative health consequences. Mario Tama/Getty Images

Congress also put an end to the egregious giveaways of public lands that took place through the noncompetitive leasing process, which for decades allowed speculating companies to acquire public land that didn't sell at auction for just $1.50 an acre. No longer will oil and gas companies be able to purchase leases in backroom deals that fail to generate a fair return to taxpayers while locking up federal land from other uses.

American taxpayers should celebrate these changes, which represent a positive step towards bringing onshore oil and gas leasing into the 21st century. But the work isn't finished yet. DOI must now take action to address other egregiously outdated policies before holding new lease sales. Taxpayers deserve a fair deal from resources extracted on public lands and should not be saddled with environmental liabilities created by oil and gas operators.

For example, in November 2021 the Biden administration recommended policy changes that would require oil and gas companies to post sufficient bond amounts to ensure that the companies themselves—and not taxpayers—are held responsible for cleaning up their operations on public lands. Allowing oil and gas companies to pick up and leave after wells no longer run a profit is a betrayal of public trust. Senator Michael Bennet of Colorado has made bonding reform a top priority, and recently called on Interior Secretary Deb Haaland to fix the broken oil and gas leasing system by updating federal bonding rates, among other reforms, to ensure the public is not forced to foot the bill for cleaning up abandoned wells.

Additionally, while the new 16.67 percent royalty rate is an improvement over the grossly below-market 12.5 percent rate that taxpayers had been stuck with for more than a century, it is still lower than the rates required on several states' lands and the rate for drilling in federal waters, which clocks in at 18.75 percent. In its rulemaking, DOI must work to ensure regular reviews and, as necessary, update the fiscal rates and terms for leasing and drilling on public lands so that they continue to provide a fair return to taxpayers.

Following from the agency's mission to protect America's public lands and cultural heritage, DOI must ensure that the federal government's management of public lands provides a fair return to taxpayers. With several lease sales already slated for the coming months, it's critical that DOI move forward with rulemaking as soon as possible. The longer we wait, the more our taxpayers, communities, and public lands lose.

Steve Ellis is the President of Taxpayers for Common Sense.

The views expressed in this article are the writer's own.