The Biden administration on Friday made it more expensive for fossil fuel companies to extract oil, gas and coal from public lands, raising royalty rates for the first time in 100 years in an effort to end underground royalties enjoyed by one of the most profitable in the country. industries.
The government also increased more than tenfold the cost of the bonds companies must secure before drilling.
The new rules are among a series of environmental regulations being pushed as President Biden, in his final year in the White House, seeks to solidify policies designed to protect public lands, reduce fossil fuel emissions and expand renewable energy sources.
While the oil and gas industry strongly opposes the higher rates, the increase is not expected to significantly discourage drilling. The federal rate was much lower than what many states and private landowners charge for drilling leases on state or private property.
“These are the most significant reforms to the federal oil and gas leasing program in decades and will limit wasteful profiteering, increase returns for the public and protect taxpayers from bearing the costs of environmental cleanups,” he said. Secretary of the Interior Deb Haaland. .
The government estimates the new rules, which would also raise various other rates and fees for drilling on public lands, would increase costs for fossil fuel companies by about $1.5 billion between now and 2031. After that, rates could rise again.
About half of that money would go to states, about a third would be used to fund water projects in the West, and the rest would be split between the Treasury and Interior departments.
“This rule will finally curb some of these wasteful handouts for the fossil fuel industry.” smallhelp Josh Axelrod, senior policy advocate at the Natural Resources Defense Council. “Communities, environmentalists and taxpayer advocates have been demanding many of these changes for decades.”
The rate hike was imposed by Congress under the Inflation Reduction Act of 2022, which directed the Interior Department to raise the royalty fee from 12.5 percent, set in 1920, to 16.67 percent . Congress also mandated that the minimum bid at auction for drilling leases should be raised from $2 per acre to $10 per acre.
But the sharp jump in bond payments — the first increase since 1960 — was decided by the Biden administration, not Congress. It came in response to arguments from environmental advocates, watchdog groups and the U.S. Government Accountability Office that the bonds don’t cover the cost of cleaning up abandoned, uncapped wells, leaving taxpayers with that burden.
“Taxpayers have been losing billions of dollars in a broken leasing system with these ridiculously low royalty rates, rents and minimum bids for far too long,” said Autumn Hanna, vice president of Taxpayers for Common Sense, a fiscal watchdog group. “Adding insult to injury, taxpayers were left holding the bag for losses from oil and gas companies they left behind, long after they had already benefited from them. We have these resources and it’s time to be fairly compensated.”
The new rules increase the minimum bond for a single drilling lease from $10,000 to $150,000. The cost of a bond for a drilling lease on multiple public lands in a state will increase from $25,000 to $500,000.
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Oil and gas companies said the changes, which could take effect in as little as 60 days, would hurt the economy.
“As energy demand continues to grow, oil and gas development on federal lands will be fundamental to maintaining energy security, strengthening our economy, and supporting state and local conservation efforts,” said Holly Hopkins, vice president at the American Petroleum Institute. lobbying for oil companies. “Overly onerous land management regulations will jeopardize this critical energy supply.”
The oil and gas industry will continue to receive nearly a dozen federal tax breaks, including incentives for domestic production and write-offs tied to foreign production. Total estimates vary widely, but the Fossil Fuel Subsidy Tracker, run by the Organization for Economic Co-operation and Development, put the total at about $14 billion in 2022.
But more expensive bonds could put drilling out of reach for smaller oil and gas producers, said Kathleen Sgamma, president of the Western Energy Alliance, an association of independent oil and gas companies. “It’s ridiculously high, ridiculously out of the question,” he said. “They could actually put companies out of business and create new orphan wells.”
The Department of the Interior estimates that there are 3.5 million abandoned oil and gas wells in the United States. When oil and gas wells are dumped without being properly sealed, which can happen when companies go bankrupt, the wells can leak methane, a potent global warming pollutant that contributes significantly to global warming.
The Biden administration has had to navigate difficult terrain when it comes to fossil fuel mining on public lands and federal waters, which account for nearly a quarter of the nation’s greenhouse gas emissions.
As a candidate, Mr. Biden promised “no more drilling on federal lands, period. Period, period, period.” He also campaigned to end billions of dollars in annual tax breaks to oil and gas companies in his first year in office.
But since Mr. Biden took office, his administration has continued to sell drilling leases, compelled by court orders. The Biden administration approved more oil and gas drilling permits in its first two years in office (over 6,900 permits) than the Trump administration over the same period (6,172 permits). Congress has done nothing to end tax breaks for oil and gas companies. And in 2023, the United States produced more oil than any country, ever.
Environmentalists blasted Mr. Biden for his administration’s final approval earlier last year of a massive $8 billion oil drilling project in Alaska known as Willow.
At the other end of the political spectrum, Republicans have accused the administration of waging a “war” on fossil fuels that threatens the nation’s economy and national security.
At a rally in January, former President Donald J. Trump blamed economic inflation on Biden’s policies. “Its inflation that caused it and it would be so easy not to. All it was — is energy. Remember this, gasoline, fuel, oil, natural gas went up to a level that was impossible,” said Mr. Trump, who is running to unseat Mr. Biden. “That’s what caused the inflation and we’re going to bring it down because we’re going to drill, baby, drill. We’re drilling, baby, we’re drilling. We’re reducing it a lot.”
Last month, the Republican-majority House passed a bill, backed by Rep. Lauren Bobert of Colorado, that would force the administration to withdraw the new entitlement rule, though the measure has little chance of passing the Senate with the majority of the Democrats.
