Increased Costs for Operating Oil and Gas Leases on Public Lands Announced by Biden Interior Department
The Biden administration has recently announced plans to raise the costs for drilling for oil and gas on public lands. This move comes as part of the U.S. Department of the Interior and its Bureau of Land Management’s efforts to reform the federal oil and gas leasing program. The revised fee schedule includes changes to royalty rates, rental rates, and minimum bids for leasing public land for drilling projects.
Interior Secretary Debra Haaland describes these reforms as the most significant in decades, aiming to reduce wasteful speculation, increase returns for the public, and protect taxpayers from environmental cleanups. The new plan requires companies to bid a minimum of $10 per acre for land lease options at auction, up from the current $2 per acre. This minimum bid requirement will remain at $10 per acre until 2032, after which it will be adjusted annually for inflation.
The costs to continue renting each acre have also been revised. Previously, companies paid $1.50 per acre for the first five years, followed by $2 per acre for the next five years. Under the new plan, companies will 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 thereafter.
Furthermore, the minimum royalty for the gross production value of oil or gas extracted from leased public land will increase from 12.5 percent to 16.67 percent until at least 2032. This new minimum royalty will remain in place thereafter.
In addition to these changes, the Biden administration has also raised bond requirements for reclaiming oil and gas wells on public land. Previously, companies had to put up around $10,000 for reclamation and cleanup costs. However, this amount was deemed inadequate and did not cover potential cleanup costs, leaving taxpayers at risk. Under the new rules, companies will have to pay a minimum of $150,000 per lease and a minimum of $500,000 per state where they operate. Bond amounts will be adjusted for inflation every ten years.
Environmental groups have praised the Biden administration’s efforts to increase costs for fossil fuel extraction on public land. They argue that taxpayers have long been burdened with the cost of cleaning up after oil companies while these companies reap record profits. They also believe that oil and gas drilling on public lands contributes to the climate crisis and poses risks to drinking water. The new regulations are seen as a step towards holding oil and gas companies accountable and protecting the environment.
However, industry members have expressed concerns about the increased costs. They argue that these regulations will not improve stewardship of federal lands but will simply drive oil and gas industry members away from certain areas. They also claim that local communities that rely on revenues from federal land extractive industries will suffer as a result.
Overall, the Biden administration’s move to raise costs for operating oil and gas leases on public lands is a significant step towards environmental protection and accountability for the industry. While it may pose challenges for the fossil fuel industry and some local communities, it is seen as a necessary measure to address long-standing problems and reduce the impact of drilling on public lands.
