Trump cuts oil and gas drillers' rent on public lands, as state budgets suffer
The oil and gas industry has been allowed to pay far less than usual to the government for the right to drill on public lands under a controversial Trump administration coronavirus relief policy, an analysis by a watchdog group and the Guardian reveals.
The Bureau of Land Management has granted economic relief for drilling on land leased by the energy giants BP and ExxonMobil, according to records from the bureau.
Drillers applied for and received significant reductions in the royalties they pay, or they were given permission to suspend their leases, in what one industry group called a “rubber-stamp” process that did not consider whether companies needed the help. Records do not show whether the leaseholders or different companies operating on the leases applied for relief.
The policy has deprived states of desperately needed oil revenues during the pandemic and economic downturn. Oil and gas drillers typically pay 12.5% of the money they make from public lands to the federal government. Half of that is shared with the states where
they operate. In many cases, royalties have been reduced to 0.5% for up to two months, according to an analysis of Bureau of Land Management records by the watchdog group Accountable.US.
Chris Saeger, a spokesman for Accountable.US, said the Trump administration was “using the pandemic as cover to help its special interest allies and American taxpayers are left holding the bill”.
“Bailing out wealthy corporations with the public’s money while millions of Americans are struggling is irresponsible,” Saeger said.
In total, the Trump administration has cut royalty rates in at least 467 cases covering nearly 400,000 acres, according to a tracker from the Center for Western Priorities. It has also suspended 422 leases covering nearly 375,000 acres.
Democratic lawmakers argue that the bureau has illegally reduced royalties without assessing each company’s economic situation. An investigation by High Country News also found that the bureau “bypassed normal processes to provide pandemic relief ”.
The bureau, which did not respond to requests for comment, discontinued its policy of what critics have described as blanket approvals in June. It now will require drillers to provide documentation of why they need relief, according to an industry document obtained by the Center for Western Priorities.
“They will have to provide economic justification documentation versus the ‘rubber stamp’ that took place earlier in the Covid/oil price crisis,” a summary of bureau updates from the Independent Petroleum Association of New Mexico said.
The policy is one of many ways Donald Trump has sought to shelter fossil-fuel companies from the pandemic, including by giving at least 7,283 of them direct coronavirus aid totaling more than $3bn, according to updated figures calculated by the Guardian and Documented.
The assistance to the industry comes as the Trump administration finalizes rule rollbacks meant to boost fossil fuels, including nixing regulations aimed at limiting leaks of the greenhouse gas methane and announcing it will lease parts of the Arctic national wildlife refuge for drilling before the end of the year.
Scientists meanwhile announced that the past decade was the hottest ever recorded globally, and 2019 was either the second or third warmest on record.
Wyoming, Utah and North Dakota have been most affected by the royalty reductions, according to available records. Their state budgets are reliant on the oil and gas industry. They plan their spending based on the expected price of oil. Now, they are being hit by both dwindling energy demand and a decline in some of the royalties they normally receive.
Alex Zhang, an officer with the state fiscal health project at the Pew Charitable Trusts, said that while many states entered the pandemic with more money in reserve than they did during the Great Recession, those savings probably won’t be enough.
“I would say in the current crisis I don’t think anyone expects states to have enough reserve funds to fill budget gaps because they’re just so extraordinary,” Zhang said.
More than two-thirds of the royalty reductions approved by the Bureau of Land Management were in Wyoming.
And more than half of Wyoming’s revenue comes from extractive industries, including oil and gas. Despite entering the pandemic with the deepest budget reserve of any state, Wyoming is now facing a revenue shortfall of 28.5%, according to Moody’s Analytics.
“It seems like kind of an unfortunate time to be voluntarily giving up the state’s primary source of income,” said Alan Rogers, a spokesman for the Wyoming Outdoor Council. “Right now we’re looking at state employees losing their jobs, we’re probably looking at teachers or employees of school districts losing their jobs as funding dries up and this is going to make that worse.”
Utah has already cut its education and general fund spending by more than $1bn. North Dakota’s governor has called for state agencies to make cuts of 5% to 15%.
From March to May, 46 states saw revenue drop compared with the same period last year, according to an NPR analysis.
Of the top 10 oil producing states, six are projected to face a greater budget gap than the 50-state average through fiscal 2021, according to Moody’s.
Meanwhile, oil companies are paying less for their drilling rights.
Government records do not disclose whether a leaseholder or a different company operating on the property sought relief.
But at least four companies leasing the land where drillers got relief have a history of filing false reports on royalties, or underpaying or dodging payments, according to an Accountable.US analysis of BLM’s database. They include:
BP America, which was fined more than $5m for filing false offshore royalty reports in 2009.
ExxonMobil’s subsidiary XTO Energy, which was penalized $890,000 in 2019 for failing to provide information for a royalty audit. (The company operating on an XTO Energy lease – US realm Powder River LLC – went into bankruptcy owing millions of dollars in unpaid taxes to two Wyoming counties.) An Exxon spokesman said XTO is not the operator drilling on the land and did not apply for the royalty relief.
Citation 2002, which had previously agreed to pay $2.3m to settle allegations of underpaying royalties owed on natural gas produced from federal public lands in Wyoming. Citation declined to answer specific questions from the Guardian.
Chesapeake Exploration, a subsidiary of Chesapeake Energy – which has been penalized millions for providing inaccurate royalty information.
QEP Resources, which was fined $1.2m for inaccurate royalty reporting.
Finley Resources, which in 2014 was fined for failing to report production on federal leases.