Bail Out the American Public, Not Big Oil

The Interior Department should reject calls to grant royalty relief and other favors to the oil and gas industry in the midst of the COVID-19 pandemic. Such a bailout would put corporate profits above the emergency response required to mitigate the public health and economic crisis, deprive state and federal treasuries of funds they desperately need right now, and lock in dirty energy extraction, without providing relief to workers or communities.

The COVID-19 pandemic is a national crisis, and the need to address the health and safety of communities and workers across the nation is paramount. Yet a number of political leaders are making sure to look out for their corporate friends. Last week, some of the most reliable servants of the fossil fuel industry in the House and Senate sent letters to Interior Secretary Bernhardt asking him to grant royalty relief, lease extensions, and other favors to the oil, gas, and coal industries.

The disconnect on the part of Congressional champs in pushing corporate handouts to the dirty energy industry that will do nothing to address the coronavirus threat is unconscionable. But the very notion of providing substantial corporate relief to an industry whose business models already depend on the privilege of extracting publicly owned resources, at a deep discount to boot, should be rejected sheerly on the merits.

Thankfully, this effort has not gone unchallenged. 93 public interest groups, led by NRDC, sent a letter to the administration opposing this effort. Representatives on the U.S. House Committee on Natural Resources also wrote to Bernhardt, questioning the legality of broad royalty relief. Even the bipartisan Western Governor’s Association transmitted a letter to Bernhardt expressing alarm that the administration may consider industry handouts at this time.

Of particular concern is the notion of waiving royalty payments owed to taxpayers. The concession of waiving these financial obligations would have limited benefit for workers, deprive the American treasury and states of funds they desperately need to respond to the pandemic, and unnecessarily extend the country’s reliance to dirty fossil fuels.

By statute, when the U.S. allows private interests to lease and extract publicly-owned oil, gas, or coal, taxpayers will get a share of the value produced: royalties. For onshore oil and gas, the federal government collects 12.5% of the value produced, which it splits with the state whose boundaries encompass the minerals. That’s far under market value for these resources already. States charge far more for oil and gas produced from their lands, up to 25% in Texas. NRDC supports several bills in Congress that would ensure American taxpayers receive their fair share: H.R. 3225, introduced by Rep. Mike Levin; H.R. 4364, introduced by Reps. Ben McAdams (D-UT) and Francis Rooney (R-FL); and its Senate Companion, S. 3330, introduced by Senators Udall (D-NM) and Grassley (R-IA). Levin’s bill increases royalty rates to 18.5%, and the others bring them up to 18.75%; all of the bills also introduce other measures to raise more money through the leasing process.

For offshore oil and gas, the government typically collects 18.75% of the value produced (reduced to 12.5% for new leases in shallow water). 37.5% the revenue the federal government collects is shared with certain states in the Gulf of Mexico. NRDC does not support revenue sharing from offshore drilling for many reasons, but it would be a mistake for the federal government to reduce the money going to Gulf Producing States in the midst of this acute crisis. Gulf states, and especially the communities in them that have decades of accumulated environmental injustices—many at the hands of the oil and gas industry—are suffering intensely from the pandemic.

The American people deserve a cogent federal response to this unprecedented crisis—one that is systematically dedicated to improving the resiliency and health of our communities, lands, and waters. The proposed handouts to the oil and gas industry do the opposite.



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