Biden increases oil royalty rate, scales back lease sales
BILLINGS, Mont. — The Interior Department has announced that it’s moving forward with the first onshore sales of public oil and natural gas drilling leases under President Joe Biden, but will sharply increase royalty rates for companies as federal officials weigh efforts to fight climate change against pressure to bring down high gasoline prices.
The royalty rate for new leases will increase to 18.75% from 12.5%. That’s a 50% jump and marks the first increase to royalties for the federal government since they were imposed in the 1920s.
Biden suspended new leasing just a week after taking office in January 2021. A federal judge in Louisiana ordered the sales to resume, saying Interior officials had offered no “rational explanation” for canceling them.
The government held an offshore lease auction in the Gulf of Mexico in November, although a court later blocked that sale before the leases were issued.
Friday’s announcement comes amid pressure for Biden to expand U.S. crude production as the pandemic and war in Ukraine roil the global economy and fuel prices have spiked. The Democrat faces calls from within his own party to do more to curb emissions from fossil fuels that are driving climate change.
Leases for 225 square miles of federal lands primarily in the West were posted on Monday, officials said. The parcels represent about 30% less land than officials had proposed for sale in November and 80% less than what was originally nominated by the industry.
The sales notices cover leasing decisions in nine states — Wyoming, Colorado, Utah, New Mexico, Montana, Alabama, Nevada, North Dakota and Oklahoma.
Hundreds of parcels of public land that companies nominated for leasing had been previously dropped from the upcoming lease sale because of concerns about wildlife being harmed by drilling rigs.
At the time, officials said burning fuel from the remaining leases could cost billions of dollars in climate change impacts. Fossil fuels extracted from public lands account for about 20% of energy-related U.S. greenhouse gas emissions, making them a prime target for climate activists who want to shut down leasing.
Republicans want more drilling, saying it would increase U.S. energy independence and help bring down the cost of crude. But oil companies have been hesitant to expand drilling because of uncertainty over how long high prices will continue.
Friday’s announcement came after Interior officials had raised the prospect of higher royalty rates and less land available for drilling in a leasing reform report issued last year.
But the move brought condemnation from both ends of the political spectrum: Environmentalists derided the decision to hold the long-delayed sales, while oil industry representatives said the higher royalty rates would deter drilling.