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Climate|Biden Administration Raises Costs to Drill and Mine on Public Lands
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BIDEN ADMINISTRATION RAISES COSTS TO DRILL AND MINE ON PUBLIC LANDS
For the first time since 1920, the government has raised the rates that
companies pay. The fossil fuel industry says it will hurt the economy.
Listen to this article · 7:17 min Learn more
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Pumpjacks operate at the Kern River Oil Field in Bakersfield, Calif.Credit...Jae
C. Hong/Associated Press
By Coral Davenport
April 12, 2024Updated 1:00 p.m. ET
The Biden administration on Friday made it more expensive for fossil fuel
companies to pull oil, gas and coal from public lands, raising royalty rates for
the first time in 100 years in a bid to end bargain basement fees enjoyed by one
of the country’s most profitable industries.
The government also increased more than tenfold the cost of the bonds that
companies must secure before they start drilling.
The new rules are among a series of environmental regulations that are being
pushed out as President Biden, in the last year of his term in the White House,
seeks to cement policies designed to protect public lands, lower fossil fuel
emissions and expand renewable energy.
While the oil and gas industry is strongly opposed to higher rates, the increase
is not expected to significantly discourage drilling. The federal rate had been
much lower than what many states and private landowners charge for drilling
leases on state or private property.
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“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.
The government estimates that the new rules, which would also raise various
other rates and fees for drilling on public lands, would increase costs for
fossil fuel companies by about $1.5 billion between now and 2031. After that,
rates could increase again.
About half of that money would go to states, approximately a third would be used
to fund water projects in the West, and the rest would be split between the
Treasury Department and Interior.
THE BIDEN ADMINISTRATION’S ENVIRONMENTAL AGENDA
* Trespassing on Tribal Land: The Department of Justice has weighed in on a
court battle over an oil and gas pipeline in Wisconsin, saying that a
Canadian oil company has been willfully trespassing on tribal lands in the
state for more than a decade.
* Removing ‘Forever Chemicals’: For the first time, the federal government is
requiring municipal water systems to remove PFAS, a class of chemicals linked
to serious health problems, from the tap water of hundreds of millions of
Americans.
* Cutting Cancer Risks: Under a regulation announced by the Biden
administration, more than 200 chemical plants will be required to curb the
toxic pollutants they release into the air. The regulation aims to reduce the
risk of cancer for people living near industrial sites.
* $20 Billion in Grants: The E.P.A. plans to award grants ranging from $500
million to $6.9 billion to eight nonprofits. The organizations will in turn
use the money to offer loans to businesses, homeowners and others to spur
clean energy across the country.
“This rule will finally curtail some of these wasteful handouts to the fossil
fuel industry,” said Josh Axelrod, senior policy advocate with the Natural
Resources Defense Council. “Communities, conservationists, and taxpayer
advocates have been demanding many of these changes for decades.”
The rate increase was mandated by Congress under the 2022 Inflation Reduction
Act, which directed the Interior Department to raise the royalty fee from 12.5
percent, set in 1920, to 16.67 percent. Congress also stipulated that the
minimum bid at auctions for drilling leases should be raised from $2 per acre to
$10 per acre.
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But the sharp jump in bond payments — the first increase since 1960 — was
decided by the Biden administration, not Congress. It came in response to
arguments from environmental advocates, watchdog groups and the U.S. Government
Accountability Office that the bonds do not cover the cost of cleaning up
abandoned, uncapped wells, leaving taxpayers with that burden.
“Taxpayers have been losing billions of dollars on a broken leasing system with
these ridiculously low royalty rates, rents, and minimum bids for far too long,”
said Autumn Hanna, vice president of Taxpayers for Common Sense, a fiscal
watchdog group. “Adding insult to injury, taxpayers were left holding the bag
for damages from wells oil and gas companies left behind, long after they had
already profited from them. We own these resources and it’s about time we are
fairly compensated.”
The new rules increase the minimum bond for an individual drilling lease from
$10,000 to $150,000. The cost of a bond for a drilling lease on multiple public
lands in a state would rise from $25,000 to $500,000.
.
Oil and gas companies said the changes, which could take effect in as few as 60
days, would damage the economy.
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“As energy demand continues to grow, oil and natural gas development on federal
lands will be foundational for maintaining energy security, powering our economy
and supporting state and local conservation efforts,” said Holly Hopkins, a vice
president at the American Petroleum Institute, which lobbies for oil companies.
“Overly burdensome land management regulations will put this critical energy
supply at risk."
Image
President Biden delivers remarks on clean energy and manufacturing, the
Inflation Reduction Act and CHIPS Act in Belen, New Mexico last
year.Credit...Kenny Holston/The New York Times
The oil and gas industry will continue to receive nearly a dozen federal tax
breaks, including incentives for domestic production and write-offs tied to
foreign production. Total estimates vary widely but the Fossil Fuel Subsidy
Tracker, run by the Organization for Economic Cooperation and Development,
calculated the total to be about $14 billion in 2022.
But more expensive bonds could put drilling out of reach for smaller oil and gas
producers, said Kathleen Sgamma president of Western Energy Alliance, an
association of independent oil and gas companies. “They are ludicrously high,
ludicrously out of whack with the problem,” she said. “They could actually put
companies out of business and create new orphan wells.”
The Interior Department estimates that there are 3.5 million abandoned oil and
gas wells in the United States. When oil and gas wells are discarded without
being properly sealed, which can happen when companies go bankrupt, the wells
can leak methane, a powerful planet-warming pollutant that is a major
contributor to global warming.
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The Biden administration has had to navigate challenging terrain when it comes
to extraction of fossil fuels on public lands and in federal waters, which is
responsible for almost a quarter of the nation’s greenhouse gas emissions.
As a candidate, Mr. Biden promised “no more drilling on federal lands, period.
Period, period, period.” He also campaigned to end billions of dollars in annual
tax breaks to oil and gas companies within his first year in office.
But since Mr. Biden took office, his administration has continued to sell leases
to drill, compelled by court decisions. The Biden administration approved more
permits for oil and gas drilling in its first two years (over 6,900 permits)
than the Trump administration did in the same period (6,172 permits). Congress
has done nothing to end tax breaks for oil and gas companies. And in 2023, the
United States produced more oil than any country, ever.
Environmentalists excoriated Mr. Biden for his administration’s final approval
earlier last year of an enormous $8 billion oil drilling project in Alaska known
as Willow.
At the other end of the political spectrum, Republicans have accused the
administration of waging a “war” on fossil fuels that threatens the nation’s
economy and national security.
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At rally in January, former President Donald J. Trump blamed economic inflation
on Mr. Biden’s policies. “His inflation that he caused and would’ve been so easy
not to. All it was — is energy. Remember this, gasoline, fuel, oil, natural gas
went up to a level that it was impossible,” said Mr. Trump, who is running to
unseat Mr. Biden. “That’s what caused inflation, and we’re going to bring it
down because we’re going to go drill, baby, drill. We drill, baby, drill. We’re
bringing it way down.”
Last month, the Republican-majority House passed a bill, sponsored by
Representative Lauren Boebert of Colorado, that would force the administration
to withdraw the new royalty regulation, although the measure has little chance
of passage in the Democratic-majority Senate.
Coral Davenport covers energy and environment policy, with a focus on climate
change, for The Times. More about Coral Davenport
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