Former House Speaker and Republican presidential candidate Newt Gingrich, watching the failed attempt of the Congressional Super Committee last year to find an additional $1.5 trillion in debt savings over 10 years, pondered the possibility that oil and gas development might be a solution offering long-term national security benefits. He also recognized the fact that the federal government holds mineral rights to 279 million acres.
Gingrich called Noble Royalties Inc. founder, president and chief executive Scott Noble and posed this question: “If the federal government were to manage the American people’s land with a fiduciary attitude comparable to that of a private firm, how much royalty would you generate, and in the process of that economic activity, how much in taxes would be generated?” It turns out the amount was larger than the Super Committee was looking for.
Taking on the task, the Noble team discovered that cumulative acres leased on federal lands have declined by 66% since the Reagan Administration, from 126 million in 1984 to 39 million in 2010, and by 86% for average acres leased per year, from 9 million annually to 1.4 million.
Basing the premise on returning to 1984 levels of leasing activity on federal lands both onshore and offshore, and with the aid of Netherland, Sewell & Associates Inc., Noble determined the government is leaving $785 billion in unrealized royalty revenues over a 30-year period. “That is $785 billion that could be generated from royalties alone rather than taxing the American people,” says Noble. Add to that another $1 trillion estimated in tax revenues from the economic activity that would be generated from the $5 trillion in working interest.
“We showed that if you opened federal lands and just returned them to the norm of how much they were leased before, that over 30 years $1.8 trillion would be contributed to the Treasury. That is in excess of 10% of the