The moves are in line with the stated preferences of President Trump, who has said he does not want “to lose our great oil companies” to the pandemic, while he has disparaged wind turbines and placed tariffs on solar panels. The Bureau of Land Management, which oversees federally controlled land, argues the actions are in accordance with the law: While the agency has the legal authority to offer short-term relief to oil and gas producers, it is obligated to charge rent to wind and solar companies.
The cost of reducing oil and gas royalties — which amounted to $3 billion nationwide last year — by as much as 80 percent extends beyond the federal Treasury. The payments are shared with the states, so the decisions by the BLM will have an effect on their revenue, too.
“Not only does this boneheaded move shortchange American taxpayers and Western states at the worst possible time, it incentivizes oil production during the worst oil glut in history. That is the absolute last thing the market needs right now,” David Jenkins, president of Conservatives for Responsible Stewardship, said in a statement issued by his group. “This is just another stark example of this administration’s bumbling pandemic response, one that is fiscally irresponsible and tone deaf to the most basic market principles.”
In Utah, 76 wells operated by six companies have been afforded royalty relief by the BLM since late April. That is out of 1,498 operating wells there. Though data for other states has not yet been posted, one company said Wednesday that it has been granted relief for “several” wells in Wyoming.
Steve Degenfelder, land manager for Kirkwood Cos., based in Casper, Wyo., said the company has been under pressure all spring. Much of the oil it pumps, in six Rocky Mountain states, sells for $8 to $15 less than West Texas Intermediate, which is at about $30 a barrel, and some of its oil, called Wyoming sour, sells in the single digits.
“All of this is affected by the covid lack of demand,” he said. “And storage is as full as can be.”
Kirkwood’s Utah royalties were reduced from 12.5 percent to 5 percent. Degenfelder said it is hard to quantify the savings that will mean for the family-owned company, which has 55 employees, because the price is so volatile.
He said oil companies were able to take advantage of royalty relief in the 1980s when the price was also low. “It isn’t something the current administration pulled out of their hat,” he said.
Kirkwood, he said, may apply for relief for its wells in Nevada, North Dakota and Montana.
Another beneficiary in Utah is Denver-based QEP Resources, a publicly traded firm that reported $367 million in net income in the first quarter of this year and said in a filing that it has $70 million in cash on hand. According to BLM guidance, companies seeking relief must show how the pandemic has interfered with their operations.
QEP’s royalties at one Utah well have also been reduced from 12.5 percent to 5 percent. A payment history for the well was not immediately available; for all its activities on federal lands nationwide, QEP paid $14.9 million in royalties for 2018, the last year for which figures are available.
The company did not respond to requests for comment.
Royalties on other Utah wells that have been granted relief have been cut to as little as 2.5 percent.
On Wednesday, House Natural Resources Committee Chairman Raúl M. Grijalva (D-Ariz.) asked the Government Accountability Office, a nonpartisan agency that reports to Congress, to produce a report on whether recipients of royalty relief have properly shown they need the aid in response to the drop in oil prices.
“I am concerned that in its haste to approve huge numbers of royalty cuts, BLM may not be fully following the requirements in the regulations,” he wrote, adding that the agency has refused to provide his committee with information it asked for.
The Salt Lake Tribune reported Wednesday that under Utah Gov. Gary R. Herbert (R), the Office of Energy Development is taking a cautious approach to the royalty relief, despite the cost to the state, out of concern for the health of the industry.
Leases have been suspended for 69 wells in Wyoming. Leaseholders will still have to make payments to the BLM, but they are in effect extending the lease expiration dates.
The BLM has the authority to grant relief within certain guidelines. Its recent decisions do not constitute a bailout, it says.
“These laws and regulations have existed for decades and across multiple administrations, and BLM State Offices are only approving suspension of operations and royalty rate reduction applications when it is in the best interest of conservation to do so or when it would encourage the greatest ultimate recovery of our natural resources,” an agency statement said.
“Applications for relief are reviewed by career experts at the Bureau following longstanding procedures and its laws and regulations,” the statement said. “Any relief granted is temporary, for up to 60 days. … These longstanding processes help ensure America has a stable long-term energy supply and provide long-term value to American taxpayers.”
But even as the BLM is dispensing relief to oil and gas operators, it is sending out bills for retroactive rent payments to wind and solar companies.
For more than a year, the agency had delayed billing companies with wind turbines and solar arrays on federally controlled acres as it reviewed industry complaints that it was charging renewable projects too much for rent. The charges stemmed from a rule change in late 2016 by the Obama administration.
But this month, the BLM ended the rent holiday — effectively hitting solar and wind operators with multimillion-dollar bills in the middle of the pandemic-fueled economic downturn.
The 131-megawatt Tule wind farm near San Diego, run by the Spanish-controlled energy company Avangrid, for example, said it got a $3 million bill for two years of rent.
And Shannon Eddy, executive director of the Large-scale Solar Association, which represents utility-scale solar developers, said her group’s member companies were billed for retroactive rent for this year and last year.
Kate Kelly, public lands director at the Center for American Progress, a liberal think tank, said lawmakers and lobbyists for renewables had been trying to work with the BLM to resolve the rent issue stemming from the 2016 rule. A bipartisan group of 11 senators, including John Barrasso (R-Wyo.) and Lisa Murkowski (R-Alaska), who chair energy and environmental panels in the Senate, had urged the Interior Department in a letter last year to consider reducing payments they saw as “unduly burdensome.”
“The Trump administration did a masterful job of punting the rent question for three years, and then they wholly failed to resolve it,” Kelly said. “To send massive bills to wind and solar companies amid a global pandemic — and after years of neglecting companies’ requests for fair-market rental valuation — is a pretty hostile move. The contrast could not be starker with the administration’s response to the oil and gas industry’s relief requests.”
In a statement, the BLM said it is required by law to collect the rents. The agency added that it “continues to engage with the wind and solar industry related to rental rates and responsible development on federal land, and in some cases is exploring potentially completing individual appraisals to determine fair market value. The BLM will also consider potential reductions or waivers of rent in accordance with regulations.”
The billing comes as solar and wind developers struggle to get new work off the ground, with factory shutdowns disrupting supply chains and the economic downturn drying up investment. Eddy emphasized that the bills from the BLM would bring “no real disruption” for existing solar and wind projects.
The entire clean-energy sector has lost 594,000 jobs since the start of the pandemic, according to an analysis of government unemployment data by Environmental Entrepreneurs, an advocacy group.
Despite Trump’s expressions of annoyance with wind and solar, his administration is offering renewables some relief elsewhere. Earlier this month, the Treasury Department said it is considering ways to let solar, wind and other alternative-energy projects qualify for time-sensitive tax breaks even if construction is delayed.