Biden ups drilling costs on public lands

Article Summary –

The US Interior Department has finalized a rule making it more expensive for oil and gas producers to drill on federally owned lands, marking the first comprehensive update to the rules around drilling on federal lands since 1988. The rule includes provisions such as raising the rent charged to oil companies for using federal land and increasing the government’s share of the profits from that oil from 12.5 percent to 16.67 percent. It will also make it more expensive for drillers to abandon their oil wells after use instead of cleaning them up, arguing that current bonding rates do not sufficiently ensure that companies clean up after themselves.


New Federal Rule Increases Costs for Oil and Gas Producers

The Interior Department has made it costlier for oil and gas producers to drill on federally owned lands with a new rule finalized on Friday.

Several provisions in the rule, including elevated rent rates for oil companies using government-owned land and increased government share of oil profits, stem from the Democrats’ Inflation Reduction Act.

The Biden administration will also impose higher costs on drillers who abandon oil wells without proper cleanup after use. The administration believes the current bonding rates insufficiently incentivize companies to manage post-use cleanup.

This rule is touted as the first “comprehensive update” to the regulations surrounding drilling on federal lands since 1988.

Interior Secretary Deb Haaland stated that these reforms, the most major changes to the federal oil and gas leasing program in decades, are designed to reduce wasteful speculation, maximize public returns, and prevent taxpayers from shouldering the burden of environmental cleanup costs.

This move follows the administration’s initiative to reduce costs for renewable energy production on public lands, announced the previous day.

The new rule increases the royalty rate, or the government’s share of oil and gas profits from public lands, from 12.5% to 16.67%. It also raises rent rates from $1.50 per acre for each of the first five years of a lease and $2 per acre for the next five years to $3 per acre for the first two years and $5 per acre for the subsequent six, escalating to $15 per acre thereafter.

Furthermore, the rule raises the minimum bid for leasing lands for drilling to $10 per acre, a substantial increase from $2 per acre, and indexes the price for inflation.

Environmental activists have lauded these new regulations. Athan Manuel, Director of the Sierra Club’s Lands Protection Program, commented that this marks an end to the era of oil and gas companies leasing public lands at paltry costs and leaving polluted lands in their aftermath.


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