Biden administration raises costs to drill on public lands

The Interior Department finalized a rule Friday making it more expensive for oil and gas producers to drill on federally owned lands.

Several of the provisions in the rule — such as raising the rent the government charges to oil companies for using its land and increasing the government’s share of the profits from that oil — were set out in law by the Democrats’ Inflation Reduction Act.

The Biden administration will additionally make it more expensive for drillers to abandon their oil wells after use instead of cleaning them up. The administration argues that current bonding rates do not do enough to ensure that companies clean up after themselves.

The administration described the changes as the first “comprehensive update” to the rules around drilling on federal lands since 1988.

“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 in a written statement.

The rule comes one day after the administration moved to cut costs for producing renewable energy on public land.

Specifically, the rule raises the royalty rate – the government’s share of the profits of oil and gas produced on public lands — from 12.5 percent to 16.67 percent. 

It also increases 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 to $3 per acre for the first two years and $5 per acre for the next six, going up to $15 per acre thereafter.

Further, the rule increases the minimum amount that companies can bid for to lease lands for drilling to $10 per acre, up from $2 per acre, and adjusts the price for inflation. 

The rule received pushback from players in the oil and gas industry, who argued that the bonding requirements in particular — which seek to disincentivize abandoning wells by collecting some money for their cleanup upfront — could make public lands drilling more difficult. 

“The BLM rule will drive small producers off public lands,” said Kathleen Sgamma, president of the Western Energy Alliance, in a written statement 

She added that the bonding change in particular is “way out of proportion” to the problem. 

Environmental activists, meanwhile, celebrated the move.

“These new regulations are the kind of common-sense reforms the federal oil and gas leasing program has needed for decades. The days of oil and gas companies locking up public lands for decades for pennies on the dollar and leaving polluted lands, water, and air in their wake are over,” Athan Manuel, the Sierra Club’s lands protection program director, said in a written statement.  

— Updated at 1:45 p.m.