Congressman Ben McAdams, together with Florida Republican Congressman Francis Rooney, introduced legislation to adjust oil and gas royalties and return fair market value to taxpayers for oil and gas development on public lands.
The Taxpayer Fairness for Resource Development Act seeks to update royalty and rental rates charged by the Bureau of Land Management (BLM) for oil and gas resource production, in compliance with federal law and in line with states’ fiscal policies.
“Taxpayers deserve a fair return for industry development of these resources. The revenue received is important non-tax revenue for states and rural counties. It also brings in significant amounts for a rural water projects fund,” said McAdams. “This measure brings royalty and rental rates in line with what states such as Utah are charging, ensuring the public receives a fair return in exchange for allowing commercial companies to drill.”
Congressman Rooney stated, “For far too long, the American taxpayers have not been getting the return on investment they deserve from onshore drilling. The current onshore fossil fuel royalty rate of 12.5% has not been adjusted in nearly a century and is considerably lower than the current offshore royalty rate of 18.75%. Our proposal seeks to provide parity in royalty rates for all drilling activities.”
Federal reports by the General Accountability Office and the Congressional Budget Office have raised questions about the adequacy of current rates. The current onshore royalty rate is 12.5%, which has not changed since 1920. Rentals—an annual, per-acre fee paid by drilling lease owners– are $1.50 per acre for the first five years and $2.00 per acre for the next five years. These rates were last updated in 1987. McAdams said his bipartisan bill would increase the royalty rate to 18.75% and would raise the rental rate to $3.00 per acre for the first five years and $5.00 per acre for the remainder.
McAdams said the increase in the royalty rate would result in an estimated additional $72 million per year in revenue to Utah on federal oil and gas production. Many western states, including Utah, have strengthened their fiscal policies in order to provide a fairer return to taxpayers. Utah, Wyoming and Montana’s royalty rates on new leases are 16.67%.
The Taxpayer Fairness for Resource Development Act also requires regular adjustments by directing the Interior Secretary to adjust rates for inflation at least every four years, or as necessary, for efficient management of oil and gas resources.