President Joe Biden’s administration advanced efforts on April 12 that would raise the costs of drilling for oil and gas on public lands.
The Department of the Interior and its Bureau of Land Management (BLM) announced a revised fee schedule on April 12 for its onshore federal oil and gas leasing program. The department stated that this updated fee schedule includes royalty rates, rental rates, and minimum bids to lease public land for drilling projects.
“These are the most significant reforms to the federal oil and gas leasing program in decades, and they will cut wasteful speculation, increase returns for the public, and protect taxpayers from being saddled with the costs of environmental cleanups,” Interior Secretary Debra Haaland said of the plan.
The rule change would mean companies seeking to buy land lease options at auction would have to bid a minimum of $10 per acre, up from the current $2 per acre. That minimum bid requirement will remain at $10 per acre until 2032, after which minimum bids for leases will be adjusted for inflation annually.
The rule also revises the costs to continue renting each acre. Companies currently pay $1.50 per acre for the first five years holding a lease, then $2 per acre for the next five years. The new plan will have companies pay $3 per acre leased for the first two years, $5 per acre per year for the subsequent six years, and $15 per acre each year after that.
Currently, companies pay a minimum of 12.5 percent royalty for the gross production value of the oil or gas extracted from leased public land. The new rule raises the minimum royalty to 16.7 percent until at least 2032 and states that this 16.7 percent royalty will remain the new minimum thereafter.
The new plan also raises bond requirements for reclaiming oil and gas wells dug on public land. Until now, companies had to put up about $10,000 for reclaiming wells and cleaning up any environmental damage caused by drilling operations. Companies also had the option to put up bonds on a nationwide and per-unit basis. Now, companies will have to pay a minimum of $150,000 per lease and a minimum of $500,000 per state in which they operate.
Environmentalists, Industry Members React
The Biden administration’s move to hike costs for fossil fuel extraction on public land earned praise from environmental groups on April 12.Athan Manuel, director of the Sierra Club’s Lands Protection Program, also welcomed the move to raise drilling costs.
The added costs are likely to come as a blow to the domestic fossil fuel industry.
“The regulatory environment has become so hostile to American oil and natural gas producers operating on federal land that it’s clear the Biden Administration intends for ’multiple use' lands to only be used for conservation and recreation,” he said.
Mr. Naatz also argued that the regulations will come at a steep cost to local communities sustained by the oil and gas industry.
“The true losers with this misguided policy are states and localities that rely on revenues from federal land extractive industries to meet their budget obligations year after year,” he said. “Rather than taking their mandate to be good stewards of federal land for the betterment of the American people seriously, the Biden Administration continues to ignore the people in local towns and communities across the West in order to placate a small group of environmentalists and to further reduce American oil and natural gas production.”
