The Biden administration's new rule significantly increase the costs requirements for oil and gas drilling on federal lands.
On Friday, the Biden administration announced a rule that will increase the costs associated with drilling for oil and gas on public lands. The U.S. Department of the Interior, along with the Bureau of Land Management (BLM), released a revised fee schedule for onshore federal oil and gas leasing. This revision includes increased royalty rates, rental rates, and minimum bids necessary to lease public land for drilling projects.
Interior Secretary Debra Haaland expressed that these changes constitute "the most significant reforms to the federal oil and gas leasing program in decades," and are designed to "cut wasteful speculation, increase returns for the public, and protect taxpayers from being saddled with the costs of environmental cleanups."
Under the new rule, the minimum bid for land lease options at auction will rise from $2 to $10 per acre, a figure that will be maintained until 2032, after which it will be adjusted annually for inflation. Rental rates will also see a hike, with new leases costing $3 per acre for the first two years, $5 per acre for the next six years, and $15 per acre annually thereafter, up from the current rates of $1.50 followed by $2 per acre.
The minimum royalty rate for oil and gas production will increase from 12.5 percent to 16.67 percent until at least 2032, establishing a new baseline for future operations. Additionally, the rules mandate higher bond requirements for reclaiming oil and gas wells, raising the minimum from $10,000 to $150,000 per lease, and a state minimum of $500,000. These bonds, critical for covering environmental cleanup, will be adjusted for inflation every ten years.
Environmental groups have lauded the administration's decision. Mike Freeman, an Earthjustice attorney, stated, "For decades, taxpayers have been left to foot the bill to clean up toxic messes left behind by oil companies across the West." Athan Manuel, the Sierra Club’s Lands Protection Program director, also supported the reforms, highlighting that "the days of oil and gas companies locking up public lands for decades for pennies on the dollar and leaving polluted lands, water, and air in their wake are over."
Conversely, the fossil fuel industry has expressed concerns over the increased costs. Dan Naatz of the Independent Petroleum Association of America (IPAA) criticized the changes, suggesting that the "regulatory environment has become so hostile to American oil and natural gas producers operating on federal land" and warned that local communities reliant on revenues from such industries would be the true losers of this policy.
The new fee schedule and rules represent a significant shift in the federal oil and gas leasing program, with potential long-term implications for the domestic energy industry.
