The Biden administration is moving to increase fees for onshore oil and gas leasing on federal land, updating policies that date back to the 1950s. The move, published as a proposed rule in the July 24 Federal Register, is certain to lead to a furious assault from oil and gas industry.
In its proposal, the Interior Department’s Bureau of Land Management said that “many of the program’s regulatory requirements are outdated, do not adequately protect the fiscal interests of the American public, and do not promote leasing practices that are consistent with diligent development requirements and multiple-use and sustained-yield principles.”
A major component of the new rules would increase the amount of bonds lease holders must purchase, last set in 1951 and 1960. BLM says that “current minimum bond amounts are outdated, expose the Federal Government to significant financial risks in the event of bankruptcies, and delay ‘complete and timely’ reclamation and restoration of lease tracts, which can cause or exacerbate a range of environmental issues, including methane leaks, surface and groundwater contamination, interference with agricultural activities, and degraded wildlife habitat.”
The current minimum bond for an individual lease, set in 1960, is $10,000. For a “statewide lease,” the amount is $25,000 and for a “nationwide” lease, $150,000, both set in 1951. According to BLM, adjusting those amounts for inflation, “the 2022 equivalents of those bond amounts are $100,105, $281,399, and $1,688,394 respectively.”
The Interior proposal offers three alternatives to the current bond rules. The first would set the individual bond at $150,000 and the statewide lease at $500,000, eliminating the nationwide bond. The second alternative would be the equivalent of an inflation adjustment, at $100,000 for the individual lease and $300,000 for the statewide lease. The third alternative would be a “full liability bond.” This would “cover the full plugging and reclamation cost of all Federal onshore operations covered by the bond.” In this alternative, “BLM estimated an average lease/individual bond of $994,000 would cover 14 wells and an average statewide bond of $4,686,000 would cover 66 wells.”
The massive 87-page proposal would also increase the minimum royalty on production from 12.5% to 16.7%, increase a wide variety of filing and administrative fees, modify many agency provisions and actions, and essentially constitute a top-to-bottom reform of the aged onshore oil and gas leasing program. Comments are due Sept. 22.
In a news release, BLM said, “Modernizing the fiscal terms of the leasing program is central to this proposed rule. Federal onshore oil and gas royalty rates are historically consistently lower than on state-issued leases and federal offshore leases; in fact, onshore royalty rates hadn’t been raised in over 100 years prior to the Biden-Harris Administration taking office. Likewise, bonding levels have not been raised for 60 years, while minimum bids and rents remained the same for over 30 years.
“The proposed rule would specifically codify provisions made by Congress in the Inflation Reduction Act and the Bipartisan Infrastructure Law, as well as recommendations from the Department of the Interior’s Report on the Federal Oil and Gas Leasing Program, issued in November 2021. The proposed rule is also consistent with Executive Order 14008, Tackling the Climate Crisis at Home and Abroad.”
Environmental groups, which have long criticized the onshore leasing program, praised the administration’s proposed rule. Bob LeResche, chairman of the board of the Western Organization of Resource Councils and board member of Wyoming’s Powder Rivers Basin Resource Council, said, “American taxpayers have for too long subsidized oil and gas corporations, and it’s long overdue for BLM to require bonds that ensure full cleanup and reclamation of federal wells. This common-sense rule should easily move through the process and we look forward to its protections becoming reality sometime soon.” Shannon Anderson of the Wyoming group said, ‘“Elimination of the nationwide bonding is huge. That’s just a major loophole for industry.”
It’s unlikely the rule will move forward easily. Kathleen Sgamma, president of the Denver-based Western Energy Alliance, told E&E News, “It’s a false notion that the onshore oil and gas program is beset with so many deficiencies and problems that these overarching rules are needed.” She added, “No other program provides more royalty revenue and a higher return than federal oil and natural gas. Wind and solar provide next to nothing. For this administration, it’s never enough and more needs to be squeezed out of oil and natural gas companies.”
The alliance describes itself as “The Voice of the Oil and Natural Gas Industry in the West.” Formed in 1974, it has some 200 member companies operating on private and public lands in California, Colorado, Montana, Nevada, New Mexico, North Dakota, Utah, and Wyoming.
Extra: Major WaPo Energy Faux Pas
The following appeared in a “CORRECTION” in the print edition of the Tuesday, July 25 edition of the Washington Post: “A July 24 Page One article about hurdles facing President Biden’s push for green energy incorrectly reported the number of renewable energy projects rejected at the state and local level as tracked by the Renewable Rejection Database. A total of 79 projects have been rejected this year, not 547. The article also incorrectly said the number of rejections had risen 15 percent from last year. Fewer projects have been rejected so far this year compared with the total from 2022, when 138 were rejected.”
Unfortunately, readers of the digital version of the post on their phones did not get the correction, as corrections appear only in the print edition. Far more readers, 2.7 million, read the digital edition, compared to about 150,000 subscribers to the print product.
–Kennedy Maize
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