Gutting BLM methane rule hurts ND taxpayers

Every year millions of taxpayer dollars are lost on wasted natural gas in North Dakota and other western states. With the country facing increasing debt and growing deficits this is no time to give away billions of dollars to profitable businesses.

The Department of the Interior administers mineral leasing on 245 million acres of public lands, including almost 60,000 acres in North Dakota. Under the agency’s oversight, oil and gas operators have been flaring, venting, and leaking billions of cubic feet of taxpayer-owned natural gas from federal lands every year. This gas doesn’t get to consumers, and doesn’t generate revenue for taxpayers — it literally goes up in smoke.

Oil and gas companies have only had to pay royalties on a very small portion of this “lost gas.” In our latest analysis, Gas Giveaways, my group, Taxpayers for Common Sense, found that from 2007 to 2016, operators lost nearly 210 billion cubic feet of gas. That’s enough natural gas to supply the residents of North Dakota for 19 years. And it’s worth an estimated $1.1 trillion, but operators paid royalties on only 11 percent of it.

As the resource owners, taxpayers should be compensated for these losses. Here is how it currently works: Private companies (i.e. the oil companies) are able to lease federal lands and waters to drill, mine, harvest, or otherwise develop those valuable natural resources. Once they extract the resource and sell it for profit, they compensate the owners — federal taxpayers and North Dakota residents through royalties payments calculated on a percentage of market value. The state and federal government split the royalties 50-50 for resources developed on federal lands.

But with a less than perfect system for oil and gas extraction, significant amounts of methane (the largest component of natural gas) are lost during the process. The taxpayer’s problem — how to make sure companies pay a royalty on the lost gas and reduce waste to get as much as possible to consumers in North Dakota and the rest of the country.

Unfortunately, the Department of Interior’s latest action all but outright dismisses the problem of lost gas, and relies on failing policies of the past. Until last year, methane waste on federal lands was governed by guidance from 1979, created well before the advent of fracking and the boom in oil and gas production. In addition, ambiguity in this old policy has led to large variation in its application and cost taxpayers billions in lost royalties over the last two decades.

Under the current administration, the Interior Dept. has reversed course on plans to seriously address methane waste and the failure of the 1979 guidance by scrapping a November 2016 rule. While not perfect, the 2016 rule represented a step in the right direction by clarifying when gas is lost “avoidably,” and when it’s lost “unavoidably” during energy production on federal lands. How the loss is categorized determines when operators are charged a royalty for losing it. An essential component of how the November 2016 rule categorized gas losses was based on guidance already in place on North Dakota state lands.

Federal lands in North Dakota recorded the second-most wasted gas in 2016 — more than 7 billion cubic feet — none of which incurred a royalty. This same problem is occurring on federal lands in oil and gas producing states across the country. Now actions to fix this system are being taken off the table.

Senators Heitkamp, Hoeven, and Rep. Cramer must stand up for taxpayers by telling the Department of the Interior to stop this waste. Taxpayers in North Dakota cannot afford more broken policies.


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