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Opinion Columns

Opinion: Oil and gas companies have been paying the same federal royalty rate since 1920. It’s time that changed.

Routt County, like so many communities across the West, owes a significant part of its prosperity to oil and gas development, much of which takes place on our public lands. 

The industry has a right to use those public lands, just as other industries like outdoor recreation and agriculture are entitled to a piece of that pie. Versatility, after all, is what makes public lands such a lucrative asset to our local economies. 

Tim Corrigan

But it’s only reasonable – and in fact, guaranteed under the Federal Land Policy and Management Act and the Mineral Leasing Act – that American taxpayers receive a fair return for the commercial development of their public resource.

That simply isn’t happening right now under current fiscal policies for onshore oil and gas development on federal lands. 

Colorado has been moving in the responsible direction this year in its approach to managing oil and gas development. We’ve adopted legislation that gives local governments more control over industry activity and prioritizes public health.

And we’re in the process of strengthening standards statewide to reduce methane pollution and other harmful byproducts of development.

Now we need the federal government to step up and do their part to protect our taxpayers by reforming fiscal policy for oil and gas on federal lands. 

That starts with increasing the 12.5% federal royalty rate, which laughably hasn’t changed since 1920. In a report released early this year, former Montana Department of Revenue director Dan Bucks says that rate is too low to return a fair market value to American taxpayers.

READ: Colorado Sun opinion columnists.

All major oil and gas producing states in the West have higher royalty rates than the feds (ours and New Mexico’s is 20%), and have proved that increasing the rate hasn’t decreased industry production.  

Here’s what else is wrong with current policy: For pennies on the dollar, oil and gas companies can lock up federal lands that could be used for other revenue-generating activities.

And our two other primary revenue sources from the federal oil and gas program – the rental rate and the minimum lease bid – haven’t been updated since 1987.

Oil and gas production has more than doubled over the past 30 years, and we need rates that align with that increase if we’re going to ensure a fair return to taxpayers. If we don’t, we’re exploiting a publicly owned resource and cheating American citizens. 

The Government Accountability Office and Congressional Budget Office estimate that a royalty rate hike alone could increase revenues by as much as $38 million each year with negligible impacts to industry production.

Imagine what communities could do with that resulting revenue. I know Routt is hardly the only Colorado county in need of more funds for basic public infrastructure and services. 

It’s going to take both state and federal policies working in conjunction to shape the oil and gas industry of the future – a future that allows oil and gas activity to thrive while doing the most to protect our public resources, health and environment.

I believe wholeheartedly that it’s possible to achieve all of these goals, and I’m glad to see Colorado leaders making strides to create a regulatory framework for the industry that’s fairer to taxpayers and more protective of our public lands.

But we need our federal leaders to do what is conscionable and in the public interest and update our outrageously outdated federal onshore oil and gas program.

If we don’t, we give oil and gas companies a free pass and miss out on millions in taxpayer revenue.    

Tim Corrigan is a Routt County commissioner and a contributor to Western Leaders Voices, a program of Western Leaders Network that helps amplify the voices of local and tribal elected leaders on conservation issues in the West.


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