The Atlanta Journal-Constitution
Oil, gas companies will pay more to drill on federal land
Oil drilling costs a third more; cleanup rules are tougher.
WASHINGTON — Oil and gas companies will have to pay more to drill on federal lands and satisfy stronger requirements to clean up old or abandoned wells under a final rule issued Friday by the Biden administration.
The Interior Department’s rule raises royalty rates for oil drilling by more than one- third, to 16.67%, in accor- dance with the sweeping 2022 climate law approved by Congress. The previous rate of 12.5% paid by oil and gas companies for federal drilling rights had remained unchanged for a century. The federal rate was signifi- cantly lower than what many states and private landown- ers charge for drilling leases on state or private lands.
The new rule does not go so far as to prohibit new oil and gas leasing on federal lands, as many environmen- tal groups have urged and as President Joe Biden prom- ised during the 2020 cam- paign. But officials said the proposal will lead to a more responsible leasing process that provides a better return to U.S. taxpayers and focuses oil and gas drilling in areas that are the most likely to be developed, especially those with existing infrastructure and high potential for oil and gas reserves.
The rule also will increase the minimum leasing bond paid by energy companies to $150,000, compared with the previous $10,000 estab- lished more than 60 years ago. The higher bonding requirement is intended to ensure that energy compa- nies meet their obligations to clean up drilling sites after they are finished drilling or cap wells that are abandoned.
The plan codifies some provisions already being enforced on an interim basis in the climate law, known as the Inflation Reduction Act. It also includes provisions in the 2021 infrastructure law and recommendations from an Interior Department report on oil and gas leasing issued in 2021. That report recommended an overhaul of the oil and gas program to limit areas available for energy development and raise costs for oil and gas companies to drill on pub- lic lands and waters.
“These are the most sig- nificant reforms to the fed- eral oil and gas leasing pro- gram in decades, and they will cut wasteful specula- tion, increase returns for the public and protect taxpayers from being saddled with the costs of environ- mental cleanups,” Interior Secretary Deb Haaland said Friday.
Along with efforts to clean up so-called orphaned, or abandoned, wells, “these reforms will help safeguard the health of our public lands and nearby communities for generations to come,” Haa- land said. The rule also will ease pressure to develop areas that contain sensitive wildlife habitat, cultural resources or recreation sites, she said.
The new royalty rate set by the climate law is expected to remain in place until August 2032, after which it can be increased. The higher rate would increase costs for oil and gas companies by an estimated $1.8 billion in that period, according to the Interior Department.
The American Petroleum Institute, the oil industry’s top lobbying group, said it was reviewing the rule to ensure Biden’s Democratic administration was encouraging “fair and consistent access to federal resources” used by oil and gas companies.
“As energy demand continues to grow, oil and natural gas development on federal lands will be foundational for maintaining energy security, powering our economy and supporting state and local conservation efforts,” API vice president Holly Hopkins said in a statement. “Overly burdensome land management regulations will put this critical energy supply at risk.”