The Biden administration on Friday made it more expensive for fossil fuel companies to pull oil, gas and coal from public lands, raising royalty rates for the first time in 100 years in a bid to end the bargain basement fees enjoyed by one of the most profitable countries. industries.
The government also increased more than tenfold the amount of bonds that companies must pay before they can start drilling.
The new rules are among a series of environmental regulations being pushed as President Biden, in the final year of his term in the White House, seeks to cement policies designed to protect public lands, lower the fossil fuel emissions and expand renewable energy.
Although the oil and gas industry strongly opposes higher rates, the increase is not expected to significantly discourage drilling. The federal rate is lower than what many states and private landowners charge for drilling leases on state or private property.
“These are the most important reforms to the federal oil and gas leasing program in decades, and they will cut wasteful speculation, increase revenue for the public, and protect taxpayers from being saddled with cleanup costs of the environment,” said Interior Secretary Deb Haaland.
The government estimates that the new rules, which will also raise various charges and fees for drilling on public lands, will increase costs for fossil fuel companies by about $1.5 billion between now and and 2031. After that, prices may rise again.
About half of that money will go to the states, about a third will be used to fund water projects in the West, and the rest will be split between the Treasury Department and Interior.
“This rule will finally reduce some of these wasteful handouts to the fossil fuel industry,” shelp 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.”
The rate increase was mandated by Congress under the 2022 Inflation Reduction Act, which directed the Interior Department to raise the royalty fee from 12.5 percent, set in 1920, to 16.67 percent. Congress also stipulated that the minimum bid at auctions for drilling leases should be raised from $2 per acre to $10 per acre.
But the sharp increase in bond payments — the first increase since 1960 — was decided by the Biden administration, not Congress. It comes in response to environmental advocates and watchdog groups who have argued for years that the burden of cleaning up abandoned, uncovered wells should be shifted from taxpayers to oil companies. and gas.
“Taxpayers are losing billions of dollars to 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 are left holding the bag for damages from oil and gas companies’ wells that are left behind, long after they have profited from them. We own the this resource and it is time to pay us fairly.”
The new rules increase the minimum bond paid to purchase an individual drilling lease from $10,000 to $150,000. The amount of a bond required to purchase a drilling lease on many 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 just 60 days, would damage the economy.
“As energy demand continues to grow, oil and natural gas development on federal lands will be the foundation for maintaining energy security, strengthening our economy and supporting state and local efforts to conservation,” said Holly Hopkins, a vice president at the American Petroleum Institute, which lobbies for oil companies. “Unduly burdensome land management regulations will put this critical energy supply at risk.”
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 Cooperation and Development, calculates the total to be around $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. “They are ridiculously high, ridiculously out of trouble,” he said. “They can put companies out of business and create new orphan wells.”
The Interior Department it is estimated that there are 3.5 million abandoned oil and gas wells in the United States. When oil and gas wells are disposed of improperly sealed, which can happen when companies go bankrupt, the wells can leak methane, a powerful planet-warming pollutant that is a major contributor to global warming. of the world.
The Biden administration has had to navigate challenging terrain when it comes to extracting fossil fuels from public lands and federal waters, which are responsible for almost a quarter of the country’s greenhouse gas emissions.
As a candidate, Mr. Biden promised “no more drilling on federal lands, period. Time, time, time.” He also campaigned to end billions of dollars in annual tax breaks to oil and gas companies during his first year in office.
But since Mr. Biden took office, his administration has continued to sell leases to drill, forced by court rulings. The Biden administration approved more permits for oil and gas drilling in its first two years (more than 6,900 permits) than the Trump administration did during the same period (6,172 permits). Congress has done nothing to end tax breaks for oil and gas companies. And by 2023, the United States will have produced more oil than any other country, ever.
Environmentalists refuted Mr. Biden for his administration’s final approval 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 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 Mr. Biden’s policies. “His inflation caused by him and it is very easy not to do. All this is – is energy. Remember this, gasoline, gasoline, oil, natural gas has gone up to a level that is impossible,” said Mr. Trump, who is running to oust Mr. Biden. “That’s what caused inflation, and we’re going to bring it down because we’re going to drill, baby, drill. We drill, baby, drill. We’re taking it down.”
Last month, the Republican-majority House passed a bill, sponsored by Representative Lauren Boebert of Colorado, that would have forced the administration to withdraw the new royalty regulationalthough the measure has little chance of passing the Democratic-majority Senate.
