Some Wyoming politicians are championing the latest federal oil and gas lease sale in the state, but others are saying money is being left on the table.
A couple weeks ago, oil and gas companies purchased about $8.4 million worth of federal leases to produce in Wyoming, totaling about 40,000 acres.
Wyoming’s political leaders said this is great for industry, and in turn, great for economies in nearby towns. U.S. Sen. Cynthia Lummis (R-WY) said the success of the sale is thanks to Pres. Trump’s Unleashing American Energy Executive Order and recent changes from the GOP spending bill that make it cheaper for companies to produce.
“These provisions are anticipated to encourage expanded leasing and drilling operations, thereby boosting domestic energy output and enhancing national energy independence,” according to a Lummis press release.
But some are skeptical that Trump’s changes are benefitting taxpayers in the best way.
“We are in an era of record high production, and we should be strategic with our resources and ensure that we are getting a fair return,”said Autumn Hanna, vice president of Taxpayers for Common Sense.
The national group is worried about royalty rates, which are the fees companies pay to the federal government when they pull oil and gas from public lands. Half of that is kicked back to the state for things like roads, schools and local governments. The GOP spending bill dropped the fee for oil and gas companies by about 4%. It had been raised to 16.67% under the Biden administration.
“Royalty rates were increased in 2022, the first time in over a century, and that's because royalty rates had not kept up with the market,” Hanna said.
Hanna’s group ran the numbers on the recent sale and compared to what the rate had been. They estimate that over the lifespan of the leases, Wyoming will lose out on $11 million dollars in royalty rates.
“We assume an extremely conservative estimate for the useful lifespan of these wells – 10 years – and that's even though the typical well can produce for much longer, around 20 to 30 years. And for the estimated price of oil and gas, we use the White House projections for 2025,” Hanna said. “This is going to be a significant loss for taxpayers over the life of these leases.”
The Wyoming Economic Analysis Division told Wyoming Public Radio that estimating the future royalty revenues on leases is tricky, and that Hanna’s estimate could be low or high. It depends on oil and gas prices, industry productivity and efficiency, regulatory changes and political administration changes.
Regardless, Hanna said she thinks if the leases being offered have high production potential, companies will buy them up regardless of royalty rates.
“Industry and interest is driven by development potential, not lower growth rates. Parcels that are competitive will get high bid revenue and will be developed and enter production and produce royalty revenue,” she said. “The places where it's speculative and not competitive, then you can offer cheaper [royalty] rates to try to incentivize it.”
However, Lummis pointed to the sale this time last year that only netted about $27,600. She blamed the Biden administration’s energy policies, like the higher royalty rates, for the lower bid revenue. However, a sale earlier this year, which still had higher royalty rates in place, drew larger bid revenue at about $7.7 million.
Oil and gas lease sales typically happen quarterly. It’s the start of the development process, and the lease allows companies to move forward with exploration to determine if it's economically viable to go into production.
