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The Royalty Policy Committee: What You Need to Know

Photo credit: Taxpayers for Common Sense

Looking to Thursday’s Royalty Policy Committee meeting in Denver, Colorado, one thing that is evidently clear is this “federal committee” is now completely and unapologetically at the beck and call of the oil and gas industry. After guiding the swift passing of recommendations over the course of the last three meetings that gifted fossil fuel interests with a hall pass to environmental review, former Chairman Vincent DeVito has left his post at the RPC to take a position with an offshore oil company.

Even further concerning, is the noticeable connection between the RPC recommendations – which are clearly influenced by industry lobbyists – and the recent actions taken by the Bureau of Land Management (BLM). In the days, dare we say minutes following the last RPC meeting in Albuquerque, the BLM released an information bulletin (IB) directing BLM field offices to prioritize approving applications for drilling by finding ways to avoid environmental review and involving the public – undermining the agency’s mission and responsibility to the public. Notably, the committee closed the last meeting by announcing this IB had been posted, shortly after the Onshore Working Group had presented their recommendations which mirrored the BLM’s announcement.

Unfortunately, we are likely to continue to see this industry heavy hand play out in the upcoming RPC meeting, with a recommendation that lets industry dictate where they are going to drill, as opposed to applying for a permit and letting the BLM give them permission. And as if this all could not be enough to handle, the meeting comes amidst a leasing flurry by the Trump administration, including a controversial plan to lease Colorado’s North Fork Valley, a premier sustainable farming region in the state, for expanded fracking and drilling.

Here’s what you need to know ahead of Thursday’s meeting:

What is the Royalty Policy Committee?

The Royalty Policy Committee (RPC) was formed to advise the Secretary of the Interior on royalty management issues and protect taxpayers by ensuring the public receives the full value of the natural resources produced from federal lands.

It was established under the Federal Advisory Committee Act (FACA) which, while recognizing the merits of seeking the advice and assistance of our nation’s citizens, aims to assure that the advice is relevant, objective, and open to the public, and efficient with appropriate records and within reasonable cost. The FACA requires that committee memberships be “fairly balanced in terms of the points of view represented and the functions to be performed.” However, this committee is clearly not, with groups filing a lawsuit against the Trump Administration for violating FACA.

What has happened since the last gathering of the RPC?

The last full committee meeting of the RPC was held in Albuquerque, in June. Here are some of the most noteworthy actions that have happened since then:

  1. Revolving door spinning between Interior and industry. Vincent DeVito, who was assigned by Secretary Zinke to staff and oversee the Royalty Policy Committee left his role to join an offshore oil and gas company, Cox Oil Offshore LLC. While DeVito was chair of the RPC, the Offshore Oil & Gas Workgroup recommended DOI lower the royalty rate for offshore drilling, despite that taxpayers would lose out on billions over the life of the lease if the rate were lowered. Replacing DeVito is Scott Angellethe Director of the Bureau of Safety and Environment Enforcement. This agency is tasked with overseeing offshore oil and gas safety, yet Angelle’s past has focused on expanding and increasing offshore drilling, including leading the push to lift the moratorium on Gulf Coast drilling put in place after the BP oil spill. Notably, elsewhere at Interior, Secretary Zinke’s Deputy Chief of Staff Downey Magallanes, who led the agency’s efforts to shrink protected national monuments in Utah, left Interior last month for a position at BP.
  2. DOI starts leasing bonanza. DOI has been setting in motion policies and plans that would grease the wheels for massive, indiscriminate oil and gas leasing on public lands. The results are coming to life this September and December, with millions of acres up for lease, and will have impacts for decades to come. To put the sales into perspective, the proposed 2.4 million acres are about the size of Rhode Island and Delaware combined, or the size of the entire Yellowstone National Park, and may will be sold at bottom dollar prices. Parcels near Petrified Forest National Park in Arizona were leased just this week for only $2/acre.
  3. Arctic drilling moves forward. Arctic drilling moving forward. At a previous meeting, the Alaska Specific RPC Workgroup recommended DOI rush to hold a lease sale in the Arctic National Wildlife Refuge. DOI has wasted no time, initiating scoping for an environmental impact statement on the proposed sale and moving forward with a seismic testing plan. If the seismic plan moves forward, massive ‘shaker trucks’ would be allowed into the Refuge as early as this December to conduct testing, over the objection of Fish and Wildlife Service biologists. It remains unclear if DOI will give the public an opportunity to weigh in.
  4. DOI expected to repeal methane rule, wasting taxpayer dollars. The administration has indicated they will fully repeal the Bureau of Land Management’s Methane Waste and Prevention Rule later this month, which was established to reduce wasted natural gas from oil and gas operations on public lands and estimated to save taxpayers $800 million over the next decade. A group of 24 different conservation organizations have signed onto a letter that was submitted as a public comment for the upcoming RPC meeting. The letter aims to center a discussion on the continuing revenue lost due to natural gas waste on public lands and highlight the fact that the RPC doesn’t have any plans to address this issue.
  5. New BLM guidance mirrors RPC recommendations. At the most recent meeting of the committee in Albuquerque, the RPC reviewed and approved three recommendations to reduce environmental review of oil and gas activities. Notably, one proposal recommended requiring all Bureau of Land Management field offices to issue Categorical Exclusions (CX) from National Environmental Policy Act review for certain drilling activities. Before the ink was even dry on this recommendation, the BLM issued an Information Bulletin to its field offices to expedite the processing of drilling permits and directing that “ to comply with NEPA in the most expeditious and appropriate manner, the BLM should first consider whether other avenues for NEPA compliance are available before preparing a new EA or a new EIS.”

A second proposal recommended that BLM limit environmental review required on wells drilled into federal minerals from private or state land. Existing policy already limits the contexts in which NEPA applies, but also recognizes that the presence of federal minerals may require environmental review, as application of the Endangered Species Act and National Historic Preservation Act. Just a week after the meeting, BLM issued a new instruction memorandum on directional drilling into federal mineral estate from well pads on non-federal locations.

What will the RPC be putting forward as recommendations in Denver?

The recommendations the RPC has entertained to date would benefit companies, not taxpayers, and that will unfortunately continue at the Colorado meeting.

  1. Give industry free reign to drill. The Planning, Analysis and Competitiveness Subcommittee is recommending that DOI create a pilot project to allow industry to simply notify BLM when they want to start drilling rather than have BLM affirmatively approve an application for a permit to drill (ADP) as is the current law. This is similar to a proposal industry is pushing in Congress via H.R. 6088.

As for its rationale for this pilot, the RPC recommendation points to “backlogs” in permitting at two BLM field offices, the Buffalo Field Office in Wyoming’s Powder River Basin and the Carlsbad Field Office in New Mexico. These are two of the busiest field offices in the country. If there is a “backlog” in permitting, it is more often a result of operator caused delays than of BLM staff inaction. Imposing time limits and “streamlining” the process should not help applicants who simply do not submit complete and accurate information to the BLM in the first place. BLM’s analysis of permit times shows that much of the delay is because the operator doesn’t submit a complete application.

Removing government review of site-specific applications puts at risk surface land owners, communities, wildlands and other values that can be harmed by oil and gas infrastructure and development.

  1. Let companies set their own prices. The Fair Return and Valuation Subcommittee is recommending that DOI pursue a rulemaking to transfer the authority to set a value for public minerals from the Interior to private parties, essentially allowing producers to determine their own valuation methods for the coal, oil and gas they are drilling. This would undoubtedly result in the public not receiving fair value for the resources they own and would diminish transparency: producers could simply claim that their valuation methods are proprietary and should be kept secret.

What should the Royalty Policy Committee be recommending?

Current leasing and royalty practices are providing hidden subsidies to fossil fuel companies. This contributes to unfair compensation for the American public, and can tie up federal lands, often for decades—which means they’re neither being developed for energy nor managed for other uses that may be even more suitable for those lands, like conservation or recreation.

To encourage DOI to fix some of these problems, The Wilderness Society submitted a  petition last fall under the Administrative Procedure Act (APA) asking for reform of the oil and gas leasing program. The APA gives citizens the right to request action from a federal agency to issue, repeal, or amend a rule, and entitles them to a prompt response. However, our petition has gone unanswered from the DOI to date.

But, if the Royalty Policy Committee needs a place to start, we recommend they consider our petition, which points out how the current oil and gas leasing system is broken and proposes solutions to protect American taxpayers:

  • Inadequate reclamation bonds. These bonds should provide funding for cleaning up the damage to public lands from oil and gas development, but the funds required are nowhere near sufficient.
  • Leasing of low-potential lands. These lands are less likely to be developed.
  • Lengthy and lax lease suspensions. Federal leases are issued for ten years—longer than most leases issued by states or private parties—so the industry already has ample time to develop leased lands. The current system is simply providing even more ways to extend leases without revenue or development. As a result, BLM has failed to recover more than $82 million of rental payments, with more than 3.38 million acres of federal minerals in suspension.
  • Below-market royalty rates. Royalty rates are currently only 12.5 percent, far lower than state and private land rates.
  • Below-market rent. Oil and gas producers pay only a dollar and change annually for each acre leased.
  • Low minimum-lease bids. At just $2 per acre at a sale, these bids allow oil and gas companies to purchase and tie up lands they do not intend to use. A meaningful bid would incentivize purchases where companies intend to generate energy and revenue for the American taxpayer.
  • Unjustified reinstatements of lapsed leases. Even after leases are cancelled due to failures to pay rent, it is relatively easy for companies to get them put back in place through a “reinstatement” process, giving them another way to continue to benefit from public lands without either developing energy or providing a return to taxpayers.

 

This article was originally published by The Wilderness Society

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