Republican Sen. Chuck Grassley and Democratic Sen. Jacky Rosen have teamed up on legislation to make oil and gas drillers pay more for extracting fossil fuels on land controlled by the federal government.
The Fair Returns for Public Lands Act, introduced on Wednesday, would increase the royalty rate that companies pay to the government to drill on public onshore lands for the first time since the 1920s.
It would increase the royalty rate for oil and gas leases on onshore tracts from 12.5% to 18.75%, boost the minimum bid price from $2 per acre to $10 per acre, and enact a minimum fee of $15 per acre for submitting an expression of interest to lease, which together would encourage drillers to purchase leases more selectively and deter speculation.
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Grassley, an Iowa senator and former chairman of the Senate Finance Committee, is a leading champion of the wind industry that dominates his state.
But he described his interest in restraining federal oil and gas leasing as a matter of fairness. Last year, he introduced a previous version of the bill with former Sen. Tom Udall, a Democrat from New Mexico.
States in the West lease their lands with higher royalty rates than the federal government. Montana, Utah, and Wyoming charge 16.67%. In Texas, the rate is 25%.
In the century since Congress passed the Mineral Leasing Act in 1920, the royalty and rent fee that oil and gas companies pay to taxpayers for access to federal onshore lands have remained essentially unchanged, even as the scale of development and industry profits has grown, depriving people of “billions of dollars.”
“It’s time for my colleagues in Congress to end this oil company loophole, end the corporate welfare and bring oil leasing into the 21st century,” Grassley said in a statement. Offshore, the rates have already ranged from 12.5% to 18.75%, so the new bill wouldn’t address that.
In the case of Rosen, a Nevada Democrat, the bill is the latest example of members of her party proposing a suite of reforms to the oil and gas leasing program that could help President Biden restrict drilling on public lands without banning it.
Biden imposed an indefinite pause on issuing new oil and gas leases on federal lands and waters as part of an executive action to address climate change.
Industry officials and states whose budgets rely on royalties from federal oil and gas production, including states run by Democrats, have been watching to see whether the Interior Department tries to turn the pause into a ban.
“The current federal oil and gas program is broken, and fails to protect our public lands and the American people,” Rosen said in a statement, adding that her and Grassley’s bill would ensure that “state and local governments in Nevada and across the nation receive fair compensation to fund critical education, infrastructure, and public health projects.”
The Interior Department announced on Tuesday that it is planning to propose updates to the federal oil and gas leasing program and will release a report early this summer offering next steps and recommendations for Congress.
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House Democrats led by Rep. Katie Porter of California have introduced a companion bill to raise royalty rates. Other Democratic bills introduced in both chambers recently would increase public input into the leasing process, require cleanup and remediation of abandoned wells, and limit the amount of methane oil and gas producers can emit.
