Interior Secretary Zinke is sending a $75 million gift to oil, gas, and coal companies

So much for making sure taxpayers get a fair return from drilling on public lands

US Department of Interior, Flickr

Breaking his promise to ensure taxpayers receive a fair return from oil, gas, and coal development on U.S. public lands, Interior Secretary Ryan Zinke and the Interior Department plan to rescind 2016 royalty reforms at a cost of $75 million annually to U.S. taxpayers.

At issue is a rule implemented by the Office of Natural Resources Revenue (ONRR) — Consolidated Federal Oil & Gas and Federal & Indian Coal Valuation Reform — which updated decades old rules on taxpayer-owned oil, gas, and coal. The rule, often referred to as “the ONRR rule,” closed a major royalty loophole, first reported by Reuters, that allowed energy companies to sell coal, oil, and gas to their own companies at significantly depressed prices, thereby dodging royalty payments owed to taxpayers.

The plan to repeal the ONRR rule — laid out in a notice published in the Federal Register — is an egregious handout to oil, gas, and coal companies, literally redirecting taxpayer resources into industry coffers. As the notice explains:

“The net impact of these provisions is an estimated annual decrease in royalty collections of between $60.1 million and $74.8 million.”

And a closer look illuminates exactly where the lost taxpayer revenues are being directed:

Repeal of Consolidated Federal Oil & Gas and Federal & Indian Coal Valuation Reform, Pg. 58/59

The above chart appears convoluted, but it’s actually quite simple. It shows a mid-level cost estimate for repealing the ONRR rule, with numbers in parentheses representing lost taxpayer revenues and numbers without parentheses representing a taxpayer subsidy to industry. Secretary Zinke is planning to re-distribute over $70 million every year away from taxpayers and into the pockets of oil, gas, and coal companies. That’s 1 percent of all revenues collected by the Interior Department annually, according to reporting by Politico.

The plan to eliminate the ONRR rule adds to a growing list of handouts from Secretary Zinke’s department to oil, gas, and coal interests.

Interior Secretary Ryan Zinke swears in his new Deputy Secretary, former oil and gas lobbyist David Bernhardt | US Interior Department Flickr

Last month the Interior Department announced that it was cutting royalty rates on offshore leases by one-third, from 18.75 percent to 12.5 percent. This decision flies in the face of experts and government watchdogs who agree that a 12.5 percent royalty is excessively low, costing taxpayers, states, and the U.S. government much-needed revenues. In fact, the excessively low 12.5 percent royalty rate for onshore oil and gas production is a primary reason the Interior Department has been flagged since 2011 by the Government Accountability Office as a high-risk area vulnerable to fraud, waste, abuse, and mismanagement.

Secretary Zinke and his Interior Department are also actively working to undercut efforts at preventing the waste of taxpayer-owned natural gas. Until recently, companies could vent, flair, or otherwise waste taxpayer-owned natural gas at no cost. A new rule implemented last year aimed to slow the practice, putting more natural gas energy into pipelines, limiting waste, and generating new revenues for taxpayers.

Members of Congress are starting to notice that Secretary Zinke’s agenda is ripping off taxpayers. Just this week, Senator Maria Cantwell and Congressman Raúl M. Grijalva called the secretary to task in a letter:

“As Ranking Members of the Congressional committees charged with overseeing the Department of the Interior’s stewardship of public lands and resources, we are committed to ensuring that the American people receive their fair share for the use or sale of publicly-owned mineral resources such as oil, natural gas, and coal… Unfortunately, your Department’s actions so far this year have served to do the exact opposite, reducing the return that taxpayers receive instead of increasing it.”

There may be disagreements over how we strike a balance between energy development and other important uses of public lands, like outdoor recreation and conservation. But we should all be able to agree that oil, gas, and coal companies should be paying their fair share to taxpayers. Unfortunately, under Secretary Zinke’s leadership, we’re moving in the wrong direction.

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