The Economics

The primary driver of drilling on public lands

The single most important factor dictating when and where oil and gas companies drill is the market price of oil and natural gas. This is Economics 101: lower oil and gas prices depress revenues and discourage investment into new drilling.

While everyday Americans benefit from low oil and gas prices—it means cheaper energy bills and lower costs at the pump—oil and gas companies want high commodity prices to invest in new development projects.

Some companies and industry groups have used low prices—and depressed interest in drilling new wells—to scapegoat responsible energy development rules and safeguards on public lands. But behind closed doors and in publicly available reports to investors, oil and gas companies are transparent and honest about what is driving drilling decisions: economics.

“Average commodity prices for 2016 fell below the already suppressed 2015 average prices, and, thus, continued to negatively impact our revenues, operating cash flows and profitability and adversely affected the price of our common stock.”

Noble Energy, 2016 Form 10-K

“[T]he substantial declines in crude oil, natural gas and NGL prices that began in 2014 and continued in 2015 and into 2016 materially and adversely affected the amount of cash flows we had available for our capital expenditures and other operating expenses and our results of operations during fiscal years 2015 and 2016.”

EOG Resources, 2016 Form 10-K

This reality plays itself out in the data as well. The following chart shows average annual natural gas price against approved permits to drill on U.S. public lands. When commodity prices are high, oil and gas companies pick up the pace of development. On the flip side, when prices are low, company interest in leasing and drilling is much lower.

Meanwhile, companies are able to operate on U.S. public lands while paying below-market rates to American taxpayers for the right to drill. For example, companies can purchase new leases on public lands for as low as $2 per acre—that is less than a cup of coffee. And royalty rates on U.S. public lands—the share of revenues paid to taxpayers—are only 12.5 percent. For comparison, states across the West charge companies a royalty rate of between 16.67 percent and 25 percent for the right to produce oil and gas on state-owned lands.

LEARN MORE: Reports, Blogs, & Fact Sheets

BLOG: As Interior pivots to fossil fuel extraction, report shows it costs taxpayers bigly

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AUTHOR: ThinkProgress

REPORT: Royalties & Public Revenues from Energy Development on American Lands

Oil, natural gas, coal and other energy resources from our American public lands provide an important source of public revenue. But decades-old policies are benefiting oil and gas companies at the expense of American taxpayers.

Author: Center for Western Priorities

REPORT: Rigged: Industry’s Real Burden – Low Energy Prices

Over the past few years, the oil and gas industry – aided by its army of lobbyists and millions of dollars in campaign donations – has spun a fabulous tale of oppressive rules and diminished access to federal lands.

Author: Western Values Project

BLOG: Far from a “war on oil and gas,” companies thrived on public lands under President Obama

The Trump Administration’s plans to undermine common-sense safeguards will harm taxpayers and communities

Author: Center for Western Priorities

REPORT: Federal Oil and Gas Royalty and Revenue Reform

By charging royalty rates lower than oil and gas producing Western states, the federal government is leaving revenues on the table and shortchanging taxpayers.

Author: Center for American Progress

REPORT: A Fair Share: The Case for Updating Oil and Gas Royalties on Our Public Lands

By charging royalty rates lower than oil and gas producing Western states, the federal government is leaving revenues on the table and shortchanging taxpayers.

Author: Center for Western Priorities

REPORT: Up In Flames: Taxpayers Left Out in the Cold as Publicly Owned Natural Gas is Carelessly Wasted

Domestic oil and gas are valuable resources not only to oil and gas companies, but to consumers and the health of our overall economy.

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REPORT: A Renter's Market: Outdated Oil & Gas Rental Rates Fail Taxpayers

The federal government’s failure to charge a rational rental rate for oil and gas companies holding undeveloped leases on public lands is costing taxpayers tens of millions in annual revenue.

Author: Center for Western Priorities

REPORT: Outdated & Undervalued

 In order to fairly value public lands, we must ensure rates reflect current market value and provide a fair return to local communities.

Author: The Wilderness Society

REPORT: Follow the Oil

Rapid development increased the supply of natural gas, driving down prices, and sending companies searching for other drilling locations and revenue sources.

Author: Center for Western Priorities

REPORT: Busting the Myth of the Obama Administration’s “War on Oil”

Since President Obama entered office in 2009, oil production on public lands—which includes lands managed by the Bureau of Land Management, the U.S. Forest Service, and the U.S. Fish and Wildlife Service—has increased by 62 percent.

Author: Center for Western Priorities

REPORT: Rigged: Taxpayers pay for Big Oil companies’ profits from public lands

One need look no further than the paychecks of top oil and gas company CEOs to realize who the real beneficiaries of drilling America’s public lands are.

Author: Western Values Project

REPORT: Rigged: Big Oil, Big Subsidies

While oil and gas executives are taking home $25 million dollar paychecks, American taxpayers are getting fleeced.

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BLOG: Interior Secretary Zinke is sending a $75 million gift to oil, gas, and coal companies

Interior Secretary Ryan Zinke and the Interior Department plan to rescind 2016 royalty reforms at a cost of $75 million annually to U.S. taxpayers.

Author: Center for Western Priorities

BLOG: How drilling in the Arctic National Wildlife Refuge will hurt Mountain West oil producers

Increased oil supply from Alaska comes in direct competition with oil produced in the lower 48 — harming producers in the Mountain West.

Author: Center for Western Priorities