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States’ Share of Royalties and Leasing Revenues from Federal Lands and Minerals and States’ Role in Associated Federal Policy

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Western Governors’ Association
Policy Resolution 2017-02

States’ Share of Royalties and Leasing Revenues from Federal Lands and Minerals and States’ Role in Associated Federal Policy

A. BACKGROUND

  1. The settlement of the Western United States was very different from the earlier settlement of the Eastern half of the country. As a result, land ownership in the West consists of a patchwork of federal, state, tribal and privately owned and managed lands and minerals. Over 591 million acres of federally-owned land and over 659 million acres of federally-owned mineral estate are within the boundaries of the Western states. Many of these federal lands in Western states have significant value.
  2. The federal government sells or leases a variety of resources (minerals, gravel, oil and gas, coal, geothermal, renewable energy generating sites, timber, grazing rights, etc.) found on these federal lands to the private sector and collects substantial fees, taxes, royalties and lease payments for these rights.
  3. Recognizing the costs to states and counties from the presence of tax exempt federal lands within their borders, Congress created a number of agreements and programs to compensate the states and local governments for the loss of tax revenue, the costs of providing infrastructure and services, and the costs of protecting wildlife and natural resources in communities adjacent to federal lands.
  4. Historic agreements and programs, codified in federal law, include but are not limited to:
    • Twenty Five Percent Fund Act of 1908.
    • Bankhead Jones Tenant Act.
    • Mineral Leasing Act of 1920.
    • Taylor Grazing Act.
    • Geothermal Steam Leasing Act.
    • Renewable energy leasing revenues from development on Forest Service lands, Bureau of Land Management lands, and waters off the coasts of the Western states.
    • Federal Oil and Gas Royalty Management Act of 1982.
    • Abandoned Mine Lands grants to states consistent with 2006 Amendments to the Surface Mining Control and Reclamation Act.
  5. As a result of federal efforts to address the federal budget deficit, state funding for these historic federal agreements and programs have been targets of cutbacks during the annual appropriation process and sequestration.
  6. These agreements and programs are not proper subjects for cutbacks and sequestration. For example, royalty payments owed to states are not federal expenditures. Federal land management agencies simply administer the distribution of those revenues to states. The federal government has no discretion over this money. Payment to the states is the only authorized use for these revenues.
  7. In addition, federal processes and regulations can create uncertainty regarding sales and leases of these federal resources or slow the pace of sales and leases of these federal resources, adversely affecting states’ receipt of their share of these essential revenues.
  8. The Department of the Interior (DOI) and other federal agencies are currently examining and revising regulations and policies governing federal management of land and minerals. In particular, DOI is undertaking an effort to modify mineral lease regulations for coal, oil and gas. This effort has impacted the pace of mineral leasing on federal lands, delayed mineral leasing efforts that were ongoing, and created uncertainty about future leasing efforts.
  9. Despite the states’ substantial interest in the revenues associated with these programs and agreements, the federal government has often limited the states from participating in the decisions affecting these revenues. For example, in rulemaking related to oil and gas and in the federal coal program, previous avenues for state involvement were eliminated and prospective state involvement has been limited to participation as a general stakeholder.

B. GOVERNORS’ POLICY STATEMENT

  1. The federal government must honor its statutory obligations to share royalty and lease payments with states and counties in the West to compensate them from the impacts associated with federal land use and nontaxable lands within their borders.
  2. Shared revenues and payments to states and counties under these programs should not be treated as federal expenditures or income, subject to sequestration. The federal government has no option except to transfer these pass-through funds to qualifying states. The federal government may not make payment of these funds to any other program or entity.
  3. Governors support legislation that clarifies the unique nature of these programs and that assures states will receive full payment of statutorily-guaranteed shares of receipts, even under circumstances where federal budgets are sequestered.
  4. Governors support legislation, regulatory changes, and agency practices that provide transparency and certainty, ensure fair value for the American public, and more efficiently administer the sales and leases of the resources on these federal lands.
  5. Governors support early, meaningful and substantial state involvement in the development, prioritization, and implementation of federal environmental statutes, policies, rules, programs, reviews, budget proposals, budget processes and strategic planning. The U.S. Congress and appropriate federal agencies should provide expanded opportunities for such involvement.
  6. States should be provided meaningful opportunities to cooperate on decisions related to these historic programs and agreements in a manner commensurate with their special status as recipients of the resulting revenues. In particular, Governors support efforts to provide the states with a forum to advise DOI on federal mineral leasing royalty policy. This includes reestablishment of the Royalty Policy Committee.

C. GOVERNORS' MANAGEMENT DIRECTIVE

  1. The Governors direct WGA staff to work with Congressional committees of jurisdiction, the Executive Branch, and other entities, where appropriate, to achieve the objectives of this resolution.
  2. Furthermore, the Governors direct WGA staff to consult with the Staff Advisory Council regarding its efforts to realize the objectives of this resolution and to keep the Governors apprised of its progress in this regard.

pdfClick here to download a PDF of this policy.

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