The Trump administration’s rush to prop up the ailing oil and gas sector is having unintended consequences: Utah and other western states are being starved of desperately needed money.
That’s because the Trump administration is giving energy corporations an unnecessary break on royalty payments and suspending rent payments on leases to drill on public lands and in public waters.
In other words, the Trump administration is giving away our oil resources for free, or nearly free. It’s yet another example of the fallout from the oil and gas cronyism of the Trump regime.
Citing the coronavirus pandemic as an excuse, the federal Bureau of Land Management in April issued special guidance for oil and gas corporations “facing hardship” due to the pandemic. They are getting 60 days of reductions in royalty payments, with potential for renewal.
So far, the bureau has cut royalty fees for 126 oil and gas leases on more than 158,000 acres in Utah, Wyoming and Colorado and suspended rent payments and other obligations for 361 leases on more than 313,000 acres, mostly in Wyoming, according to a tally by the Center for Western Priorities.
Additionally, the Interior Department has granted relief for five companies that drill offshore in the Gulf of Mexico, according to the Associated Press.
Under this policy, companies are paying bargain-basement fees of as low as 0.5% for drilling on public lands, down from the typical rate of 12.5%. That means a big hit for western states.
State and local governments split this revenue with the federal government and use it to fund schools, pay teachers, firefighters and first responders. Their budgets will take another big hit due to low oil prices, declining production and cuts in royalty payments. The Western Governors Association, in an April 3 letter, said oil and gas royalties are integral to western states’ budgets and warned that “suspending their collection would have a direct negative effect on states.”
The impact is likely to be most significant in states with a lot of oil production on federal lands. Payments for onshore drilling royalties netted states $2.2 billion in fiscal year 2019, according to government data, including nearly $1.2 billion for New Mexico, $641 million for Wyoming, $108 million for Colorado, $94 million for North Dakota and $72 million for Utah. Offshore drilling rental payments and fees totaled about $225 million.
Due to the recession and loss of oil revenue, Utah and other states across the West are being thrust into a budget crisis. Utah faces an $850 million revenue shortfall. Wyoming is looking at a budget shortfall of $877 million. Colorado has made massive budget cuts. New Mexico is expected to face a budget shortfall of between $1.8 billion and $2.8 billion.
Nevertheless, the White House is still apparently working on a new giveaway that would allow oil corporations to delay royalty payments to the government for upwards of a year with no promise to make state and local governments whole. Worse still, the Trump administration also is working to hamper our clean energy future, handing huge retroactive rent bills to renewable energy operators with wind farms and solar panels located on federal land.
So why is Trump so eager to aid the oil and gas industry, rather than steering the nation toward renewable energy and electric transportation?
In a recent report, Public Citizen examined 679 meetings that corporations and nongovernment organizations had with Interior Secretary David Bernhardt, a former energy lobbyist, and five top aides over just over two years. We found that 443 meetings, or nearly two-thirds of the 679 meetings analyzed, were with energy corporations and lobbyists.
Oil and gas companies were present a a third of meetings analyzed, followed by lobbying and law firms representing mostly corporate interests at (15%), mining and coal corporations (12%) and electric and gas utilities (5%) By comparison: conservation groups represented 9% of meetings; and renewable energy interests represented only 3% of meetings.
Due to the coronavirus crisis and lockdowns, demand for energy has plummeted, and many oil corporations, especially domestic firms that rely on hydraulic fracturing, or fracking, are on the brink of bankruptcy. Many domestic oil and gas producers were already loaded with debt, had unsustainable business models and are now in deep financial trouble.
Drilling for oil has long been a boom and bust industry. The Trump administration should not intervene to prop up corporations that made bad business decisions, nor force taxpayers to shoulder the cost of cleaning up abandoned oil wells for bankrupt energy corporations.
Tax dollars should be supporting the laid-off oil workers that may indeed need government help in this challenging time for our country. But there is no doubt that the Trump administration’s’ sympathies lie with the Big Oil CEOs, rather than mom and pop small businesses and hardworking individuals.
Robert Weissman is the president of Public Citizen, Washington, D.C., a nonprofit consumer advocacy organization that champions the public interest in the halls of power.