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Oil Companies Can Set Their Own Rates for Royalties From Drilling on Public Lands Thanks to Trump: Report

"Oil and gas corporations already pay pennies compared to what they make in profits from plundering public lands—land that belongs to the American people—and now they'll pay even less."

A drilling rig in the Uinta Basin in Utah, with the Uinta Mountains shown in the background. (Photo: WildEarth Guardians/Flickr/cc)

In a display of loyalty to what Greenpeace called "the most polluting industry in history," the Trump administration is allowing dozens of oil and gas companies to set their own rates for royalties they're required to pay on revenue generated from drilling on public lands. 

As High Country News reported Thursday, the Bureau of Land Management (BLM) contacted its state offices the day after global oil prices plunged to below $0 per barrel as the Covid-19 pandemic caused an unprecedented drop in demand. 

"Trump and his fossil fuel cronies continue to use the cover of a deadly pandemic to bail out the fossil fuel industry in every way possible. Public lands should be used for public good—instead they're being handed over to fossil fuel billionaires at rock-bottom rates."
—Collin Rees, Oil Change International

The federal agency, which oversees 96,000 oil and gas wells and more than 24,000 leases on public lands, ordered state officials to encourage more drilling despite an excess supply of oil which was forcing companies to pay for oil storage.

In addition to suspending lease payments, BLM told states to allow companies to apply for relief from royalties, the mandatory taxes on the revenue the fossil fuel industry earns, which are used to support public schools, higher education, and healthcare in Western states. 

According to High Country News, BLM instructed state offices to allow oil and gas companies to decide how much they want to pay in royalties for the duration of the pandemic, suggesting that the standard rate of 12.5% be reduced to as low as 0.5%.

"Trump and his fossil fuel cronies continue to use the cover of a deadly pandemic to bail out the fossil fuel industry in every way possible. Public lands should be used for public good—instead they're being handed over to fossil fuel billionaires at rock-bottom rates," Collin Rees, senior campaigner at Oil Change International, told Common Dreams. "We need to phase out all drilling on public lands as quickly as possible, but in the meantime, fossil fuel companies must be held accountable for the damage they’re doing."

Climate action group Greenpeace called the scheme an "ill-fated oil bailout," the profits of which are likely to go to fossil fuel CEOs, and not rank-and-file workers in the industry. 

"Oil and gas corporations already pay pennies compared to what they make in profits from plundering public lands—land that belongs to the American people—and now they'll pay even less," said campaigner Charlie Jiang. "The Interior Department's priorities could not be more wrong. Nurses need masks. Essential workers need paid leave, hazard pay, and childcare. Employees need paychecks. People need help all over this country. But every day the Trump administration ignores their pleas and caters to billionaire donors instead."

Between April 30 and May 18, BLM offices approved 76 requests by companies for lower royalty rates, with some requesting 0.5% or 0.0%. The royalty relief is being offered as the federal government continues to hold lease sales and auctions across the West, offering drilling leases at bargain prices due to the market's downturn. 

The cheap sales combined with low or non-existent royalty payments "means lower financial return on federal oil for energy-dependent Western states," wrote Nick Bowlin at High Country News.

"Oil and gas companies are struggling," added Bowlin. "But so are Western states, and the new BLM policies allow companies to drill for public resources while generating scant public revenue."

As oil companies are being offered relief—amid calls, bolstered by the struggling market, by progressives to nationalize fossil fuel industries in order to aid in a transition to renewable energy—the Trump administration this week abruptly ended a rent holiday for solar and wind companies operating on federal lands, demanding $50 million in back rent payments. 

Renewable energy firms are struggling amid the pandemic, with many projects delayed and access to federal subsidies cut off. Before the coronavirus began spreading around the world, however, the solar and wind power sectors were growing faster than fossil fuel industries. 

On social media, Rep. Nanette Barragan (D-Calif.) called on Congress to pass the ReWIND Act, which would block the Trump administration from cutting royalty rates.

"Congress must step in and stop this ill-fated oil bailout by passing the ReWIND Act before it goes any further," said Jiang. 

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