Administration raises the price to drill, mine on public lands

The Biden administration 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 bargain basement fees enjoyed by one of the country's most profitable industries.

The government also increased more than tenfold the amount of the bonds that companies must secure before they start drilling.

The new rules are among a series of environmental regulations that are being pushed out as President Joe Biden, in the last year of his term in the White House, seeks to cement policies designed to protect public lands, lower fossil fuel emissions and expand renewable energy.

While the oil and gas industry is strongly opposed to higher rates, the increase is not expected to significantly discourage drilling. The federal rate had been 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 they will cut wasteful speculation, increase returns for the public and protect taxpayers from being saddled with the costs of environmental cleanups,” Interior Secretary Deb Haaland said.

The government estimates that 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 2032. After that, the minimum royalty rate could increase again.

About half of that money would go to states.

“This rule will finally curtail some of these wasteful handouts to the fossil fuel industry,” said Josh Axelrod, senior policy advocate with 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%, set in 1920, to 16.67%. 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 jump in bond payments 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 do not cover the cost of cleaning up abandoned, uncapped wells, leaving taxpayers with that burden.