Biden Administration Implements Reforms To Oil And Gas Leasing

Interior Secretary Deb Haaland speaks at the National Geographic Society in Washington, Friday, March 3, 2023. Oil and gas companies will have to pay more to drill on public lands and satisfy s

The Biden administration has implemented a final rule that will require oil and gas companies to pay higher fees for drilling on public lands and adhere to stricter guidelines for cleaning up old or abandoned wells. This move comes as part of efforts to align with the 2002 climate law, which mandates a royalty rate increase for oil drilling to 16.67% from the previous 12.5% that had been in place for a century.

While the new rule does not outright ban new oil and gas leasing on public lands, it aims to establish a more responsible leasing process that offers better returns to U.S. taxpayers. The Interior Department's decision is based on provisions outlined in the Inflation Reduction Act, the 2021 infrastructure law, and recommendations from a 2021 report on oil and gas leasing.

Interior Secretary Deb Haaland emphasized that these reforms mark a significant shift in the federal oil and gas leasing program, focusing on reducing speculation, increasing public returns, and protecting taxpayers from bearing the costs of environmental cleanups. The rule also addresses the issue of orphaned wells, aiming to safeguard public lands and nearby communities for future generations.

Efforts align with the 2002 climate law and aim to offer better returns to taxpayers.

Royalty rate for oil drilling increased to 16.67% from 12.5%.

Rule emphasizes responsible leasing process and cleanup of old wells.

Furthermore, the new rule directs oil and gas leasing towards areas with high development potential and existing infrastructure, reducing pressure on sensitive wildlife habitats, cultural sites, and recreational areas. The increased royalty rate is expected to remain in effect until August 2032, potentially costing oil and gas companies an estimated $1.8 billion over that period.

In addition to the royalty rate increase, the rule raises the minimum leasing bond to $150,000 from $10,000, a figure established in 1960. This adjustment is intended to ensure that companies fulfill their obligations to clean up drilling sites or cap abandoned wells, preventing taxpayers from shouldering cleanup costs in cases of operator negligence or bankruptcy.

The Interior Department has allocated over $1 billion in the past two years from the infrastructure law to address orphaned oil and gas wells on public lands. The new rule seeks to mitigate future financial burdens on taxpayers by holding energy companies accountable for environmental remediation and site reclamation.