Where's the Public Among the Royalty Policy Committee's Interests?Tweet
November 21, 2017
The Interior Department has included among the “public interest” positions on an energy revenue advisory committee members with ties to industries that extract natural resources from federal lands. Since these industries have an interest in paying the government as little as possible—and already occupy many spots on the committee—the selection of these members raises concerns about excessive industry influence over federal energy and natural resource policies.
Secretary of the Interior Ryan Zinke reconvened the Royalty Policy Committee (RPC) in March, stating “It's important that the taxpayers and tribes get the full and fair value of traditional and renewable energy produced on public lands and offshore area.” Established in 1994, the RPC grew out of efforts to incorporate state and industry input on oil and gas exploration in the outer continental shelf of U.S. waters, and has since expanded to onshore leases.
The Interior Department is responsible for leasing federal and tribal lands to companies that drill or mine, as well as collecting the royalties companies must pay on what they take. Those royalties bring billions of dollars into the Treasury, constituting one of the largest revenue sources to the federal government. Interior also directs billions of dollars to oil-producing states, a practice President Trump has said he wants to end in order to shrink the budget deficit.
The panel currently includes 20 members and 18 alternates. Of the 20 primary members, six come from industry, euphemistically called “mineral/energy stakeholders”; six represent states that receive more than $10 million annually in royalty revenues; four represent Indian nations that own land leased to energy companies; and four come from academia and “public interest” groups.
A look at the latter category, however, indicates some of those interests are more “special” than “public.” While most of the members do work in academia, three teach at technical schools that specialize in the applied science degrees that lead to careers in the energy industry. One member is a private industry consultant, and another used to work for a tribe. None of the members represent advocacy groups or other sectors of non-governmental civil society.
The members include:
Daniel Rusz, Research Director of Coal Markets & Supply for Wood Mackenzie, an international firm that consults with industry in the natural resources and chemical sectors. Rusz spent decades in the private sector working for railroads, electric utilities, and extractive companies including Massey Energy, whose CEO was convicted in 2015 of conspiring to violate mine safety laws.
Van Romero, Vice President for Research, Professor of Physics, and Chief Operating Officer at the New Mexico Institute of Mining and Technology (New Mexico Tech). New Mexico Tech has been called a “research institution that happens to have a university,” and industry is intimately involved in campus life, sponsoring and mentoring students to give them “a taste of what they will experience once they enter the workforce.”
Roderick Eggert, Viola Vestal Coulter Foundation Chair in Mineral Economics at the Colorado School of Mines. The Viola Vestal Coulter Foundation provides funding for academic research and scholarships focused on mining. He also is Deputy Director of the Critical Materials Institute, a Department of Energy program focused on increasing production of rare earth metals and other minerals that frequently partners with industry.
Monte Mills, Assistant Professor and Co-Director of the Margery Hunter Brown Indian Law Clinic at the University of Montana. Mills focuses on the intersection of Indian law and natural resources issues, and previously directed the legal department of the Southern Ute Indian Tribe in Colorado. Last year, a federal watchdog agency reported that the tribe pressured high-level Interior Department officials to remove a Bureau of Indian Affairs whistleblower after he raised questions about the tribe’s compliance with oil and gas lease laws and regulations.
Kwame Awuah-Offei (alternate), Associate professor of mining engineering at Missouri University of Science & Technology. Awuah-Offei also worked for Granite Construction and served as a mining engineering academic fellow for the Securities and Exchange Commission (SEC). He also operates an independent consultancy, Sphinx Mining Systems LLC, dedicated to “helping publicly traded mining companies provide compliant and meaningful disclosure regarding their mining properties.”
Graham Davis (alternate), Professor of Mineral Economics at the Colorado School of Mines. Before joining the university in 1993, Davis held several positions in the mining industry, including three years at a Rio Tinto uranium mine in Namibia, two years at the Placer Dome silver mine in Canada, and another year in Namibia to consult for the Deblin mineral mines. He currently consults “in confidential mine valuation for several large mining companies” and has “significant experience as an expert witness in litigation involving mine valuations.”
Under the Federal Advisory Committee Act, the Secretary chooses committee members from a pool of prospective members whose names are submitted for consideration following an announcement in the Federal Register. Though we reached out to all members named here, the only ones who responded were Romero and Eggert, both of whom emphasized that their universities were funded primarily by state and federal money. Regarding their approach to royalty policy, Romero summed his up as “simple rules and regulations that are understood by all are the best,” while Eggert said he was “committed to public policy that appropriately incorporates multiple perspectives into policy analysis and formation.”
“My personal perspective is explicitly an economic one that emphasizes what is appropriate or optimal for society as a whole rather than for only one segment or another of society,” Eggert said.
The RPC has long given short shrift to civil society. Previous iterations either had no members representing the public interest or a token member who was often a retired employee of industry or government. The RPC was instrumental in crafting industry-friendly royalty payment processes such as eliminating late fees, shortening the appeals process, and granting royalty relief on low-producing fields.
The system for calculating resource royalties has historically suffered from mismanagement and outright corruption. A particularly lurid example is the Royalty-in-Kind program, which dissolved after Interior’s Inspector General found that federal staff partied with and received gifts from employees of the oil and gas companies they were supposed to be auditing.
The Trump administration has made increased production of domestic resources a cornerstone of its energy policy. Trump issued an executive order in March requiring agencies to review regulations that “potentially burden the development or use of domestically produced energy resources,” and stated in June that he would launch an era of “energy dominance” by removing restrictions on natural gas drilling and lifting a moratorium on coal production, among other steps. His administration has already made its approach toward royalty reform clear by repealing a rule that prevented industry from reducing royalty payments by selling minerals to affiliated companies at reduced rates. The rule would have brought taxpayers an additional $60 to $75 million each year, but industry lobbyists said it was burdensome and confusing.
In keeping with this approach, the current RPC charter differs from past charters in directing members to “advise on the potential impacts of proposed policies and regulations related to revenue collection from such development, including whether a need exists for regulatory reform.”
There’s nothing wrong with federal agencies seeking advice from the private companies with which it does business or regulates. Industry is certainly a stakeholder in the Interior Department’s royalty regime, but so is the public, and the billions of taxpayer dollars at stake should earn true public advocates more seats at the table. After all, as Trump has noted, energy resources belong to all of us.
Laura Peterson is an investigator for the Project On Government Oversight.
Authors: Laura Peterson
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