As High Country News reported Thursday, the Bureau of Land Management (BLM) contacted its state offices the day after global oil prices plunged to below $0 per barrel as the Covid-19 pandemic caused an unprecedented drop in demand.
The federal agency, which oversees 96,000 oil and gas wells and more than 24,000 leases on public lands, ordered state officials to encourage more drilling despite an excess supply of oil which was forcing companies to pay for oil storage.
In addition to suspending lease payments, BLM told states to allow companies to apply for relief from royalties, the mandatory taxes on the revenue the fossil fuel industry earns, which are used to support public schools, higher education, and healthcare in Western states.
According to High Country News, BLM instructed state offices to allow oil and gas companies to decide how much they want to pay in royalties for the duration of the pandemic, suggesting that the standard rate of 12.5% be reduced to as low as 0.5%…
The cheap sales combined with low or non-existent royalty payments “means lower financial return on federal oil for energy-dependent Western states,” wrote Nick Bowlin at High Country News.