Thank you, and please reach out with any questions.
Dear Speaker Pelosi and Majority Leader Schumer:
After a significant and important $4.7 billion dollar investment toward plugging orphaned wells in the Infrastructure Investment and Jobs Act of 2021, it is critical that the House and Senate also advance common sense reforms to this country’s federal
oil and gas program. As outlined below, these reforms will lower federal liability and economic waste, and can raise billions of dollars in revenue, increasing taxpayer returns on publicly owned resources for the American people while better protecting the
health of local communities and our air, water, and climate. Specifically, we ask that legislative proposals updating federal oil and gas bonding standards and minimum bids, rents, and royalty rates; ending non-competitive leasing; and ending the leasing of
lands with low or no potential for oil and gas development form the basis for these important reconciliation priorities.
It is essential that Congress acts to prevent future orphan wells by ensuring that oil and gas companies meet their legal obligation to plug and remediate their wells. One of the best ways to accomplish this is updating the woefully insufficient and outdated
federal bonding requirements currently in place. As numerous recent analyses have shown, the costs of remediating oil and gas wells after their useful lives can cost over $100,000 per well, far beyond the $10,000 bond an operator can currently secure for all
of its oil and gas wells on an individual federal lease. Low bond minimums disincentivize proper reclamation of wells.
While oil and gas producers are being let off the hook for cleaning their polluting legacies, they are also enjoying subsidies and handouts in the form of inordinately low royalty rates, minimum bids, and rents. The federal onshore program’s fiscal policies
are outdated, failing to account for increased production, falling behind inflation, and lagging behind state rates. In fact, all of the major oil and gas producing states in the West require higher royalty rates than the federal government’s onshore rate.
The federal onshore royalty rate has not changed since 1920, while rental rates and minimum bids have not been updated since the 1980s.
These stagnant rates have also resulted in a non-competitive leasing scenario where oil and gas companies have been able to hoard public lands for next to nothing, preventing other productive uses. According to a recent Government Accountability Office
(GAO) report, 99 percent of recently issued non-competitive leases never produced oil or gas; so, taxpayers are not even earning royalties from the vast majority of these leases. Congress should also act to end the practice of selling leases without a competitive
bid. Reprioritizing the federal leasing program away from public lands with low potential for development will cut administrative costs and end speculative leasing.
As a result of these badly outdated policies, taxpayers have missed out on billions of dollars of potential revenue. Indeed, the GAO has found - across a decade and more than 20 reports - that the federal oil and gas program is “vulnerable to waste, fraud,
abuse or mismanagement, or in need of transformation.” Addressing the GAO’s findings, which include the major areas of concern highlighted in this letter, will generate significant increases in federal revenue, secure a fair price for the American public,
and save taxpayer money in the future. Congress has an opportunity to act through the budget reconciliation process to enact reforms to this outdated system.
Updating federal oil and gas bonding standards and minimum bids, rents, and royalty rates; ending non-competitive leasing; and ending the leasing of lands with low or no potential for oil and gas development should form the basis of Congress’ reconciliation
priorities in this space. Each of these important reforms will help advance responsible management of our shared public resources and will protect the interests of taxpayers, frontline communities, and future generations.
On behalf of our millions of members nationwide, thank you for your attention to these important issues.