In a hearing on Capitol Hill on Tuesday, Colorado industry leaders pushed back against efforts to raise the lease rates paid by oil and natural gas developers operating on federal lands and to impose strict restricting on venting and flaring. Speaking before the House Natural Resources Committee, state and industry officials from Colorado discussed the negative impact these changes would have on energy development.
“Congress is considering legislation designed to decrease American production, not consumption, of oil and natural gas by adding more cost and red tape onto federal lands. Adding more cost has the same effect as taxes: if you want less of something, tax it more,” said Kathleen Sgamma, president of the Western Energy Alliance, who explained that raising royalty costs and increasing regulation on the industry would “further erode the competitiveness of federal lands.”
Western Wire is a project of the Western Energy Alliance.
Meanwhile, others argued that current royalty rates benefited industry at the expense of taxpayers, who were failing to receive a “fair return” from oil and gas development.
“In terms of the practical uses of royalty revenues, achieving a fair return from oil and gas is important to managing the effects of the boom and bust cycles of resource extraction, especially on local communities in rural areas,” said Dan Bucks, former director of the Montana Department of Revenue.
“Shortfalls in royalty collections hamper efforts in those communities to protect public health and safety, repair environmental damage, and diversify their economies for long-term resiliency,” he continued.
Although domestic energy production has surged over the past decade, much of that growth has occurred on state and privately-owned land. Only a small fraction of the oil and gas produced in the U.S. come from federal lands and members of the committee disagreed over the degree to which regulation would change that figure.
“That is all to do with resources and to do with where the resources are. Shale reserves are not located on federal lands,” said Frank Rusco, director of natural resources and environmental for the U.S. Government Accountability Office (GAO).
Other representatives argued that onerous federal regulations increase the costs of operating on federal lands.
“The reason the royalties are low is because the cost to do business on federal lands is so much higher,” said Rep. Bruce Westerman (R, Ark.).
Sgamma agreed, saying that, “The federal government has decided to extract more cost on the regulatory and process side than it can on the permit side. If state which can permit so much more efficiently could have that authority on federal lands as well, it would go a long way to making federal lands competitive.”
According to analyses by the GAO, raising lease rates for energy production on federal lands would likely decrease production, but raise revenues overall. The GAO also found, in a 2010 analysis, “that economically capturing vented and flared natural gas could increase federal royalty payments by $23 million annually.”
Capturing excess methane, instead of burning it or venting it into the atmosphere prevents waste and reduces emissions. However, industry groups argue that it is more effective to regulate the issue on the state and local level, especially because other federal agencies already enact similar policies.
“Mr. Getz’s bill is redundant with the EPA,” said Sgamma. “The BLM doesn’t have the authority to regulate air quality, this is the domain of EPA and the states.”
She pointed out that passing the new law would require that BLM manage emissions, something that the bureau is unequipped to do.
The Methane Waste Prevention Act would require oil and gas companies to capture 85 percent of all gases they produce at drilling sites on public lands within three years after the legislation is enacted and 99 percent within five years. It is similar to EPA rules regulating energy development on private lands. The EPA regulations were initially modeled off of Colorado’s regulations. According to figures cited by the Colorado Department of Public Health and Environment, natural gas production in Weld County increased from less than 70 million cubic feet to 145 million cubic feet between 2014 and 2018. During the same period, under Colorado’s strict emissions laws, emissions from the drilling sites fell by 70 percent.
