WASHINGTON – Today, the American Exploration and Production Council (AXPC) released the following statement in response to the U.S. Department of Interior Press Release issued this week about the review of the federal oil and gas program called for in the Biden Administration’s Executive Order 14008:
“AXPC represents some of the largest operators on federal lands, and we would like to work with this Administration to ensure responsible development of federal lands is able to continue for the benefit of the American taxpayer. Oil and gas exploration and production activities on federal lands contribute billions of dollars to federal and state governments, support millions of good paying jobs and local economies, and are conducted under some of the most stringent safety and environmental regulations in the world.
“Developing federal minerals directly benefits taxpayers and communities. Stopping development through arbitrary leasing and permitting restrictions only serves to cause uncertainty for American businesses and strained budgets for state and federal governments as well as local communities.
“It can easily take 10 years for a company to move into the production phase after a lease is initially secured – this ‘exploration and development’ time includes: geological surveys, resource evaluations, surface and facility designs, working with landowners and addressing surface and sub-surface rights, environmental and social assessments, and transportation and infrastructure considerations for takeaway and to reduce or avoid flaring. Oil and natural gas development is a long, comprehensive process that requires thoughtful planning to ensure safe and environmentally sound operations and economic production. Despite years of investments and paying rent, not every lease will yield production. The American people receive revenue and tax benefits throughout every stage of the process, not just during production. From securing the initial lease, to exploration, development, and production, oil and gas activities on federal lands are benefitting Americans. Claims otherwise are misleading and detrimental to our nation’s ability to Build Back Better.”
The Biden administration’s Executive Order on Tackling the Climate Crisis at Home and Abroad (“Executive Order”) that indefinitely suspends the federal oil and gas leasing program.
Oil and gas operations on federal lands contribute significantly throughout a multitude of activities, for example:
- The oil and gas industry provides significant, important revenues to Federal and state governments in the form of royalties, rents, bonus bids and taxes. The revenues from onshore oil and natural gas production to run their states – everything from public education to nationwide conservation efforts – depend on money coming from American oil and natural gas companies’ ability to produce on federal lands.
- To obtain federal and state leases, companies pay bonus bids, rentals, and royalties to the government. A bonus bid is a cash amount paid by a company at the time that it bids and successfully wins the rights to a lease. Annual rentals, normally in the form of a fixed dollar amount per acre, are then paid to preserve the rights to a lease until the company achieves production or the lease terms expire. Once production is achieved, companies pay a royalty to the government based on the value of the oil and gas produced.
- Companies also pay federal income taxes in compliance with current U.S. tax policy requirements placed on all commercial entities. And for some state land production, companies will pay severance taxes directly to the state – a tax imposed on the removal of nonrenewable resources such as crude oil, condensate and natural gas, coalbed methane and carbon dioxide.
- Royalties: In 2019 alone, oil and gas contributed more than $8.5 billion to the federal government through bonuses, rents, and royalties.
- Noncompetitive Leases:The Bureau of Land Management offers leases competitively through auction, or noncompetitively for a fee if an adequate bid is not received. Noncompetitive leases must first go through the competitive process before they become noncompetitive. According to GAO leases that started in FY2003—FY09 found that competitive leases produced oil and gas more often than noncompetitive leases during the leases’ 10-year primary term.