Rep. Lipinski Bill Would Require Royalties On All Gas
Drilling companies would have to pay royalties on all the natural gas they extract from federal lands under a bill introduced this week by a House Democrat.
Illinois Rep. Dan Lipinski's H.R. 3140, which seeks to increase revenue to taxpayers and utilize more of the domestic gas from public lands, is backed by environmental groups, including the Sierra Club and Natural Resources Defense Council.
Current regulations exempt companies from paying royalties for natural gas that they burn off, or flare, when such gas cannot be economically captured and sold on the market. Companies are also exempt from royalties for gas they use on site to power drilling equipment.
"Resources on federal lands are being developed inefficiently, costing U.S. taxpayers millions of dollars in lost royalties each year, especially with respect to vented, flared, and leaked natural gas," Lipinski said in a statement.
Lipinski cited a Government Accountability Office study from 2010 that found oil and gas operators could economically capture about 40 percent of their flared or vented natural gas on federal lands with off-the-shelf technologies.
He also pointed to a report last November from Taxpayers for Common Sense that found drilling companies received $380 million in royalty breaks over the past several years for natural gas extracted from federal onshore tracts, most of which was gas used by companies on site to support production by fueling drilling rigs or compressing gas or to fire steam generators.
Elizabeth Thompson, president of EDF Action, said in a statement yesterday that the bill "eliminates the needless waste of millions in taxpayer dollars while fighting climate change."
But Lipinski's bill faces an uphill battle in a GOP-controlled House where Republicans have blocked proposals to raise the cost of drilling on public lands.
Oil and gas officials have warned that raising production costs could deter companies from drilling on public lands, thereby thwarting the production of oil and resulting in a much greater loss to taxpayers.
Kathleen Sgamma of the Western Energy Alliance, based in Denver, said last fall that, "ultimately, the taxpayer benefits much more from the current situation, where market forces ensure a return to both the companies and the taxpayer that is greater than if returns were constrained with too much government interference in the market."
She said there's a built-in incentive for companies to capture, sell and pay royalties on as much gas as possible.
It is unclear how much additional production and revenue Lipinski's bill would generate if passed into law.
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