Federal oil, gas leasing policies shortchange taxpayers

Recently, the Department of Interior released a long-awaited report confirming what many of us already knew: The oil and gas leasing system on federal lands is broken. Taxpayers are not receiving their fair share of income; wildlife conservation and outdoor recreation opportunities have been squandered; and local communities have been put at risk by outdated leasing policies. All of this has been bad news for New Mexico’s business community.

For over 100 years, the federal onshore drilling royalty rate has not changed, meaning that taxpayers aren’t getting a fair market price from oil companies for the privilege of using our public lands. Far higher rates are currently charged for oil drilling on private and state lands — and it’s time to update the rates charged on federal lands. According to the Government Accountability Office, royalty and rental rates could be increased — greatly benefiting taxpayers and state budgets — with “negligible” impacts on production. It’s long past time for the rates to be raised.

The current leasing system also hampers conservation and recreation initiatives by leasing lands that have little or no potential for ever being developed for energy. As the report from the Interior Department noted, this practice “fosters speculation by oil and gas companies to the detriment of competition and American consumers.”

Ninety-nine percent of these lands are never used for drilling, but because they are under lease, they aren’t managed for conservation and recreation — activities that could actually generate money for our state. Wildlife watching, hunting, fishing and other outdoor recreation is an economic engine that contributes $2.3 billion to the state’s GDP and supports more than 33,000 jobs. Those numbers could grow even larger if so many of our federal lands weren’t tied up in leases that will never be developed for oil and gas.

Finally, the Interior Department report notes that orphaned wells on federal public lands pose serious health risks by leaking methane and other toxins into the air and water. Wells become “orphaned” when an oil company goes bankrupt and can’t afford to properly cap and clean up its wells. There are more than 73,000 such orphaned wells in New Mexico alone and, by some estimates, it will take $10 billion to plug them properly. An overwhelming 92 percent of New Mexican voters agree the industry must shoulder this cost, not us taxpayers. The problem has been that the government has been charging far too little for bonding — that is the fee companies are charged in advance to cover cleanup costs. In fact, most states have secured less than 1 percent of the money needed for such cleanups. It’s time to raise bonding rates, so taxpayers aren’t left on the hook for those costs.

The Department of Interior is to be applauded for this report — but now it is time for the Biden Administration and Congress to work together to enact these reforms. Some of these reforms are in the Build Back Better Act, which was passed by the House of Representatives and is currently under consideration in the Senate. I urge Sens. Martin Heinrich and Ben Ray Luján to be strong champions of these reforms. The Biden administration also should implement some reforms independently from Congress and should do so swiftly to ensure that New Mexico’s wildlife, outdoor recreationists, rural communities, taxpayers and small businesses can reap the benefits of healthy and thriving public lands well into the future.