In response to a temporary slump in oil prices during COVID-19 stay-at-home orders, the Trump Administration gave the fossil fuel industry a huge handout by reducing royalties for oil and gas companies operating on federal public lands.
Royalties are a percentage of the value of extracted fossil fuels, paid back to the federal government with a share for state and local government. In the 2019 fiscal year, Utah received nearly $72 million from a 12.5% royalty on federal lands extraction.
There are two major problems with the royalty reduction.
First, public lands drilling is a major contributor to climate change. A 2018 U.S. Geological Survey report found that public lands extraction contributes nearly a quarter of all U.S. greenhouse gas emissions. Putting limits on federal lands extraction could offer a regulatory pathway to rein in climate change.
The Intergovernmental Panel on Climate Change has warned that in order to limit climate change to 1.5-2℃, carbon-reduction goals must be met within the next 10 years.
The natural contraction of the fossil fuel industry resulting from the pandemic was a squandered chance to permanently reduce emissions.
The other big problem is that royalties from fossil fuel production on federal lands are the primary source for mineral lease disbursements that fund various state agencies as well as a Permanent Community Impact Fund that is supposed to mitigate negative environmental and social impacts of boom-and-bust extractive industry.
In practice, these royalties are a mixed blessing. A 2020 legislative audit found that the Community Impact Board (CIB) that manages the fund has been using the money improperly to fund economic development for fossil fuel industries. Royalty money also funds endless anti-public lands litigation on the part of the State. Nonetheless, some of the money gets where it should be. In 2019, royalty money was used to pay for things like emergency vehicles, sewer system upgrades, municipal water systems, community centers and hospital upgrades.
The giveaway to industry makes corporate profits a priority over community well-being.
All of Utah’s Republican congressional delegates signed letters to Interior Secretary David Berrnhardt supporting this industry bailout.
Federal Lands Greenhouse Gas Emissions and Sequestration in the United States (USGS, 2018): https://pubs.usgs.gov/sir/2018/5131/sir20185131.pdf; Global Warming of 1.5℃ (IPCC, 2018) https://www.ipcc.ch/sr15/
This is an excerpt from our July Environews column. View the full article here.