In April, the U.S. Department of Interior’s Bureau of Land Management (“BLM”) issued guidance reducing the royalty rate for energy companies that drill for oil and gas on public land. The announcement came as analysts began to understand the dire financial consequences of the COVID-19 pandemic on the oil and gas industry. BLM’s guidance aimed to provide a lifeline to the already struggling industry.
The Mine Leasing Act of 1920 (“MLA”) governs the development of oil and gas on federal land. It authorizes the Secretary of the Interior to hold auctions for the subsurface rights of federal lands that contain fossil fuel deposits. Under this arrangement, an energy company submits a bid for the lease, and, if successful, pays the federal government rent and royalties for its use.