Sen. Chuck Grassley (R., Iowa) joined Sen. Tom Udall (D., N.M.) in introducing the bipartisan Fair Returns for Public Lands Act of 2020 (S. 3330) to update the nation’s public lands royalty system and ensure that taxpayers get fair returns on leases of public land for oil and gas production.

“Low royalty rates on oil produced on federal lands has deprived the federal treasury of billions of dollars,” Grassley said. "Today marks 100 years since Congress passed the Mineral Leasing Act of 1920. Since then, the royalty rate has not been addressed. This is just one example of Big Oil saying it wants a free market but lobbying for taxpayer-funded corporate welfare. 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."

“Public lands and their natural resources belong to the American people, and it’s only fair to ask those who profit from them to return a fair share to taxpayers. Oil and gas companies are paying significantly higher royalty rates offshore and on many state and private lands, and there is no need to give federal onshore producers a sweetheart deal at a time of record U.S. production, along with rising climate change and habitat impacts,” Udall said. "After 100 years of the Mineral Leasing Act, it is high time for real reform that gives state and federal taxpayers their fair share of royalties that fund important education, infrastructure, public health and environmental needs in communities across the country, and particularly in the West. I am proud to introduce this commonsense, bipartisan bill with Sen. Grassley to ensure that New Mexicans and the American people get a fair deal when they let for-profit companies operate on their public land."

The legislation modernizes the public lands leasing system for the first time since royalty rates were set a century ago. The legislation increases both the share of royalties taxpayers receive from public lands leasing as well as rental rates. The new rate reflects the current fair market value, while the bill also establishes minimum bidding standards to lease public lands. Similar measures implemented in Texas and Colorado did not affect the states’ overall production.

According to studies by the Congressional Budget Office (CBO) and the Government Accountability Office (GAO), modernizing public lands royalty rates for oil and gas could increase federal revenues by as much as $200 million over the next decade, with little to no impact on overall production. The bill would increase the royalty rate from the 12.5% established by the Mineral Leasing Act of 1920 to 18.75%. Many states have already updated royalty rates for public lands leasing to as much as 25% -- double the current federal rate.

The federal royalty adjustment will also benefit taxpayers on the state level. Taxpayers for Common Sense calculated that New Mexico’s state government has lost an estimated $2.5 billion in revenue over the last decade because of outdated federal rental rates, below-market royalty rates and waste from oil and gas wells, with federal taxpayers losing an equivalent amount.

The Fair Returns for Public Lands Act of 2020 would modernize public lands leasing policy in the following ways:

Biofuel supporters welcomed the bill, which seeks to close a century-old loophole exploited by oil companies and takes a step toward leveling the playing field for producers of all transportation fuels.

“Study after study shows that the oil and gas industry benefits each year from billions of dollars in hidden subsidies, write-offs, incentives and other giveaways. If oil producers and refiners truly want a 'free market' in the energy sector, they should start by giving up the subsidies and tax preferences that have robbed state and federal coffers for 100 years or more,” Renewable Fuels Assn. president and chief executive officer Geoff Cooper said. “We hope this bill sets lawmakers on a path toward comprehensive energy tax policy reform and that the end result is a fair and open market that offers true competition and consumer choice."

Iowa Renewable Fuels Assn. executive director Monte Shaw added, “Oil companies have been fleecing the taxpayers for 100 years by paying pennies on the dollar for resources extracted from public lands. We should all remember this the next time we hear Big Oil talk about just wanting a level playing field. The playing field can never be level when petroleum companies have secret advantages. This is just one of many hidden Big Oil tax subsidies, and we thank Sen. Grassley for shining a light on it.”