Biden forces oil companies to pay more for drilling on public lands

The move by the Interior Department’s Bureau of Land Management would require oil companies to pay $150,000 for each lease on federal lands, up from $10,000. Despite high inflation, this marks the first time the so-called guarantee requirements have been updated since 1960.

For the first time in a century, fossil fuel companies must pay more royalties on the oil and natural gas they extract from federal lands based on the total revenue they receive. Under the new regulations, the minimum royalties paid by the government will increase from 12.5% ​​to 16.67% of revenue. This percentage is more in line with the higher tax rates charged by most private landowners and major oil and gas producing states.

The rule comes as the Biden administration prepares a sweeping plan to limit future oil drilling on some 13 million acres of the Alaska National Petroleum Refuge, the largest public land in the United States. Bloomberg News first reported that the Interior Department is expected to finalize the plan, another key element of the president’s conservation agenda, in the coming days.

Supporters say the changes announced Friday will better compensate taxpayers for fossil fuel extraction on federal lands and will prevent taxpayers from footing the bill for cleanup of abandoned oil and gas wells. Fossil fuel companies have abandoned thousands of wells after ending drilling operations or shutting them in, causing the sites to leak greenhouse gases and toxic substances like arsenic and benzene.

The Bipartisan Infrastructure Act of 2021 provides a record $4.7 billion to states’ efforts to plug these “orphan wells.” But federal funding is likely to have only a small impact on the problem, and some experts estimate there may be millions of undiscovered orphan wells across the country.

“Doing business has a cost, and the industry should bear the cleanup costs of its operations,” said Autumn Hanna, vice president of Taxpayers for Common Sense, a nonpartisan watchdog group. “They extract oil from public lands and Natural gas is for its own benefit and these resources are owned by taxpayers who should not have to bear the cost of cleanup themselves.”

Kate Grossinger, communications manager for the Center for Western Priorities, a conservation group, said the changes “are only fair” after the country’s largest oil and gas company last year posted its biggest annual profits in a decade. Exxon Mobil reported a profit of $36 billion, while Chevron had a net profit of $21.4 billion.

“They make huge profits and then hold taxpayers accountable,” Grotzinger said of such companies.

Fossil fuel industry trade groups expressed strong concerns about the proposed rule released by the BLM last summer. A coalition of 14 industry associations wrote in public comments that the proposal could hinder domestic fossil fuel production and make the United States more dependent on other countries for energy needs.

“We are concerned that the BLM’s actions exceed its statutory authority and could have a devastating impact on U.S. energy security and the economy,” groups including the American Petroleum Institute and the Independent Petroleum Association of America wrote.

Dan Nutz, executive vice president of the Independent Petroleum Association of America, previously told The Washington Post that the proposed rules would make it harder for smaller oil and gas companies to drill on public lands.

“I don’t know of any companies that are just speculating or just sitting on a lease,” Nutz said. “The goal is production.”

Friday’s rules codify provisions from Biden’s signature climate law, the Inflation Reduction Act. It also directs oil companies to prioritize leasing in areas with existing energy infrastructure and high production potential, rather than in areas with sensitive wildlife habitat or cultural resources.

In addition to overhauling fossil fuel production on federal lands, the administration also seeks to promote renewable energy development in these areas. On Thursday, the Interior Department announced it had approved nearly 29 gigawatts of clean energy licenses, enough to power more than 12 million homes. That number includes dozens of solar farms, wind turbines and geothermal projects.

Also Thursday, the Interior Department finalized a rule that would reduce the rents and fees renewable energy developers pay to use public lands. The rule would reduce these payments by approximately 80% compared with requirements in place starting in 2022.

Interior Secretary Deb Haaland said in a call with reporters that the Biden administration has approved more than twice as many renewable energy projects as the Trump administration. She said former President Trump, who criticized the high cost of wind power and falsely claimed wind turbines caused cancer, had slowed — but not stopped — the U.S.’s transition away from fossil fuels.

“The previous administration did everything it could to hinder our department’s clean energy plan, but we are making up for lost time as we focus on this urgent and overdue transition to a better future,” Haaland said.