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House panel advances plan to hike oil drilling fees

The onshore oil and gas royalty rate has not changed since 1920

The legislation sponsored by Rep. Katie Porter, D-Calif., would raise the onshore royalty rate to 18.75 percent.
The legislation sponsored by Rep. Katie Porter, D-Calif., would raise the onshore royalty rate to 18.75 percent. (Tom Williams/CQ Roll Call file photo)

A House panel voted a bill out of committee Wednesday that would raise the royalty fees oil and gas companies pay to operate on federal land.

Petroleum and natural gas companies pay a 12.5 percent fee to the treasury on their revenue from onshore leases. That rate has not changed since it became law in 1920, and it is lower than the federal offshore rate of 18.75 percent.

The legislation from Rep. Katie Porter, D-Calif., would raise the onshore rate to 18.75 percent. It was approved by the House Natural Resources Committee by a vote of 23-14 Wednesday evening. The vote followed a six-hour markup that highlighted tensions between Republicans and Democrats over the future of energy leasing on and in federal land and water, as well as subsidies for energy companies.

Sens. Charles E. Grassley, R-Iowa, and Jacky Rosen, D-Nev., have a companion bill in the Senate.

Leasing of federal territory has rocketed to a factious issue this Congress as the Biden administration declared a moratorium on new leases, a move that drew indignation from Republicans. The White House is also pushing a plan to set aside 30 percent of the country’s land for conservation by 2030.

The Interior Department held a public forum in late March about the future of the federal oil and gas leasing and permitting process, and Interior Secretary Deb Haaland told lawmakers there is an ongoing need for fossil energy domestically.

“Fossil fuels will continue to play a major role in America for years to come,” Haaland said. “But too often the extraction of resources has been rushed to meet the false urgency of political timetables rather than careful consideration for the impacts of current and future generations.”

[Republicans still skeptical of Haaland after first session]

Oil and gas royalties comprise a significant source of income for the federal government, including $4.2 billion from onshore energy and mineral leases for fiscal year 2019.

Republicans, with Louisiana Rep. Garret Graves vociferously criticizing Porter’s bill, voted against it, saying it would push companies overseas and increase prices.

“This is an attempt to stop any domestic oil production in the United States,” Graves said, sometimes shouting. “This bill is part of that agenda.”

At one moment, Porter asked Rep. Raúl M. Grijalva, D-Ariz., the committee chairman, to prod members not to speak in loud tones. Graves replied that members have the ability to adjust their own volume at home.

Porter said the bill would not shutter the oil and gas industry. “That energy production on public lands can and will continue if this bill passes,” she said.

“What will change is the fact that the oil and gas companies are getting effectively tax-paid welfare,” she said. “We are all being shorted the revenue that taxpayers collectively, Democrat or Republican, deserve.”

The back-and-forth spun into a debate over the nature of subsidies for fossil fuel-based energy and renewables in the federal tax code, with Porter saying there are financial benefits only available to oil companies in tax law, while Graves rebutted that drilling companies have to pay fees on extraction and non-emitting industries, like solar, do not.

The three other bills centered on fossil fuel leasing on federal property. One measure, from Rep. Mike Levin, D-Calif., would raise the minimum bid acceptable during a lease sale, and another, from Rep. Alan Lowenthal, D-Calif., would strengthen the financial bonding process for oil and gas extraction. That bill calls for a national inventory of abandoned or “orphaned” wells, which are a point of President Joe Biden’s jobs proposal.

There are hundreds of thousands of abandoned mines and oil and gas wells nationwide.

A third bill, also from Lowenthal, would block oil and gas permits from being approved without a cleanup plan for the site in question.

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