WASHINGTON – Oil and gas companies will have to pay more to drill on federal lands and meet stricter requirements for cleaning up old or abandoned wells, according to a final rule issued Friday by the Biden administration.
The Interior Department rule increases royalty rates for oil drilling by more than a third to 16.67%, in line with the sweeping 2022 climate law passed by Congress. The previous 12.5% rate paid by oil and gas companies for federal drilling rights has remained unchanged for a century. The federal fee was significantly lower than what many states and private landowners charge for drilling leases on state or private lands.
The new rule stops short of prohibiting new oil and gas leasing on federal lands, as many environmental groups have called for and as President Joe Biden promised during the 2020 campaign. But officials have said the proposal will lead to a leasing process more responsible approach that will provide a better return to U.S. taxpayers and focus oil and gas drilling in areas most likely to be developed, especially those with existing infrastructure and high potential for oil and gas. reservations.
The rule will also increase the minimum lease bond paid by energy companies to $150,000, compared to the previous $10,000 set more than 60 years ago. The higher bonding requirement is intended to ensure that energy companies meet their obligations to clean up drilling sites after drilling is complete or to cap abandoned wells.
The plan codifies some provisions already provisionally applied in the climate law, known as the Inflation Reduction Law. It also includes provisions from the 2021 infrastructure bill and recommendations from a Department of the Interior report on oil and gas leasing issued in 2021. That report recommended a review of the oil and gas program to limit the areas available for energy development and increase the costs of oil and gas. companies drill on public lands and waters.
“These are the most significant reforms to the federal oil and gas leasing program in decades and will reduce unnecessary speculation, increase returns to the public and protect taxpayers from being burdened with the costs of environmental cleanups,” said Secretary of the Interior, Deb Haaland, on Friday. .
Along with efforts to clean up so-called orphaned or abandoned wells, “these renovations will help safeguard the health of our public lands and nearby communities for generations to come,” Haaland said. contain sensitive wildlife habitats, cultural resources or recreation sites, she said.
The new royalty rate established by the climate law is expected to remain in effect until August 2032, after which it may be increased. The higher rate would increase costs for oil and gas companies by about $1.8 billion over that period, according to the Interior Department.
The American Petroleum Institute, the oil industry’s main lobbying group, said it was reviewing the rule to ensure that the Democratic Biden administration encouraged “fair and consistent access to federal resources” used by oil and gas companies.
“As demand for energy continues to grow, oil and natural gas development on federal lands will be critical to maintaining energy security, boosting our economy, and supporting state and local conservation efforts,” said Vice President of API, Holly Hopkins, in a statement. management regulations will put this critical energy supply at risk.”
Environmental groups hailed the rule change as a way to ensure accountability for energy companies that have long had cheap access to federal lands.
“For too long, oil and gas companies have profited from offers to drill on our public lands. This rule will finally reduce some of these wasteful donations to the fossil fuel industry,” said Josh Axelrod, senior policy advocate at the Natural Resources Defense Council. “Communities, conservationists and taxpayer advocates have been demanding many of these changes for decades, and it’s great news that the Biden administration is taking action on this today.”
The change in bond rates is a key element of the new rule, officials said. The previous $10,000 fee, set in 1960, was too low to force companies to clean up old drilling sites and did not cover the potential costs of reclaiming a well, officials said. As a result, taxpayers often end up covering the costs of cleaning up abandoned or depleted wells if an operator refuses to do so or declares bankruptcy. Hundreds of thousands of orphaned oil and gas wells and abandoned coal and hard rock mines pose serious safety risks while causing ongoing environmental damage.
The Department of the Interior has made more than $1 billion available over the past two years from the infrastructure law to clean up orphan oil and gas wells on public lands. The new rule aims to prevent this burden from falling on taxpayers in the future.
Bureau of Land Management Director Tracy Stone-Manning, whose agency issued the new rule, said it “will help protect critical wildlife habitat, cultural resources and recreational values” while ensuring a fair return for taxpayers. The agency manages more than 245 million acres of public lands, mostly in the West.
Lawmakers were divided by party.
Rep. Raul Grijalva of Arizona, the top Democrat on the House Natural Resources Committee, called the rule an important step toward reining in oil and gas companies.
“When Big Oil uses our public lands, it stands to reason that they should give American taxpayers a fair return for the privilege,” he said. “That’s why Democrats worked so hard to pass reforms to the Inflation Reduction Act to return some balance to a leasing system that has favored polluters for too long.”
Wyoming Sen. John Barrasso, the top Republican on the Senate Energy and Natural Resources panel, said the rule imposes unfair costs on energy companies that will result in less drilling, fewer jobs and more dependence on Middle Eastern oil.
“As a candidate, Joe Biden recklessly threatened to end oil and natural gas production on federal lands,” Barrasso said. “As president, he is doing everything he can to make energy production on federal lands economically impossible.”
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This story has been corrected to show that the climate law was in 2022, not 2002.
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