Taxpayers Closer to Getting Fair Return on Public Natural Resources

This is the third in a series looking at the five most significant natural resource reforms made during the Obama administration and the five reforms the next administration needs to tackle.

If public lands are owned by the American people, shouldn’t taxpayers get their fair share from gas, oil, and minerals that private companies pull out of that ground and sell on global markets?

That’s the premise of the Project On Government Oversight’s work on holding the government accountable for the way it does business with companies that extract natural resources from public lands. Over the past eight years, the Obama administration has made some welcome progress on getting taxpayers more bang for the buck from natural resources, but there is still a long way to go.

Let’s look at one reform that was achieved in the past eight years and one that still needs to be made.

THE VICTORY: The Royalty-In-Kind program is terminated in 2009

In 1997, the Interior Department’s Minerals Management Service (MMS) implemented the Royalty-In-Kind program, which allowed oil, gas, and mining companies to make royalty payments to the federal government in the form of product rather than cash. Almost from the start, it was evident that MMS lacked the oversight capabilities to ensure companies were sufficiently compensating taxpayers for the natural resources they extracted from public lands.

POGO maintained that the program’s lack of transparency and oversight meant that the royalties owed to the federal government were essentially paid on an honor system. POGO published a series of five reports on the underpayment of royalties by major oil and gas companies to the federal government, including a 2008 report recommending the immediate phase-out of the Royalty-In-Kind program.

In her 2009 testimony before the House Committee on Natural Resources, POGO Executive Director Danielle Brian called the Royalty-In-Kind program a “failed experiment.” Amid mounting concerns from the federal government’s internal watchdogs and pressure from POGO and Taxpayers for Common Sense (TCS), MMS terminated the Royalty-In-Kind program in 2009.

THE FIGHT GOES ON: Ensure a fair return on renewable energy

Under a new rule the Bureau of Land Management (BLM) is expected to release this year, solar and wind energy companies would have to compete for leases and pay fees to the federal government—much like non-renewable energy companies. POGO tracks the government's progress on the initiative to collect royalties on renewable energy. This new rule will ensure companies pay fair market value for use of public resources, and that taxpayers receive a fair return the companies’ use of federal lands. As renewable energy development becomes more common, establishing a competitive and transparent leasing process that delivers a fair return to taxpayers is essential.

Upcoming: The United States joins the Extractive Industries Transparency Initiative but more transparency is needed with squandered resources like lost natural gas.