Washington D.C. – Natural Resources Chair Raúl M. Grijalva (D-Ariz.) this morning highlighted a newly released Government Accountability Office (GAO) report finding that the Bureau of Land Management’s (BLM) royalty reductions for oil and gas companies during the COVID-19 pandemic violated its own regulations, and were implemented so haphazardly and inconsistently that BLM cannot determine if it achieved its stated goals of conserving public resources and protecting U.S. taxpayer interests.
BLM regulations allow the agency to lower royalties at an oil and gas well only if the company can show that the reduction would make an uneconomic well profitable. Grijalva requested in May that GAO investigate whether BLM was following those regulations in cutting royalties around the country during the pandemic.
The GAO report, Federal Oil and Gas Revenue: Actions Needed to Improve BLM’s Royalty Relief Policy, available at https://bit.ly/2SwAkNc, finds that BLM didn’t consistently require companies to prove their wells on public lands needed the royalty reduction in order to keep operating. The watchdog found that BLM offices in different states used wildly different standards to review royalty cut applications, estimating that the royalty cut policy and its implementation cost taxpayers at least $4.5 million.
GAO found no evidence showing such reductions were necessary for companies to keep their wells operating.
Companies pay a 12.5 percent federal royalty on all oil and gas extracted from federal public lands. The rate has not increased in a century and is considerably lower than what is charged on state and private lands.
In response to the significant drop in the oil price early in the pandemic, BLM rushed to develop a temporary royalty cut policy to prop up drilling on public lands. Over several months, five BLM state offices – Wyoming, Utah, Montana/Dakotas, Colorado, and New Mexico – approved 581 royalty reduction applications and cut rates from 12.5 percent to an average of less than 1 percent.
GAO will testify on the report at today’s Energy and Mineral Resources Subcommittee hearing at 2:00 p.m. Eastern time. The event is on Facebook at https://bit.ly/3cMA5a9and YouTube at https://youtu.be/wa1msknKLoY.
Despite an invitation from the Committee, BLM refused to provide a witness to testify.
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