The Biden administration on Friday raised the cost for fossil fuel companies to extract oil, gas and coal from federal lands and ended cheap basement fees enjoyed by one of the nation's most profitable countries. The usage fee was raised for the first time in 100 years. industry.
The government has also increased by more than tenfold the amount of bonds companies must secure before drilling begins.
The new rules come as President Biden seeks to strengthen policies aimed at protecting public lands, reducing fossil fuel emissions and expanding renewable energy in his final year in the White House. It is one of the environmental regulations.
The oil and gas industry strongly opposes the rate increases, but the rate hikes are not expected to significantly hamper drilling. The federal rate was much lower than what many states and private landowners charge for drilling leases on federal and private lands.
“These are the most significant reforms to the federal oil and gas leasing program in decades, reducing wasteful speculation, increasing returns to the public, and protecting taxpayers from the cost of environmental cleanup,” said Secretary of the Interior Deb Haaland. “It will protect us from the burden,” he said. .
The government estimates that the new rules will increase costs for fossil fuel companies by about $1.5 billion between now and 2032 because they will also increase various other fees and charges for drilling on public lands. Thereafter, the minimum royalty rate may rise again.
About half of that money will go to the states, about a third will be used to fund water projects in the West, and the rest will be split between the Treasury and Interior departments.
“This rule will finally reduce some of the wasteful returns to the fossil fuel industry.” sSupporting Josh Axelrod, senior policy advocate at the Natural Resources Defense Council. “Communities, conservationists, and taxpayer advocates have been demanding many of these changes for decades.”
The rate hike was mandated by Congress under the Inflation Control Act of 2022, which directed the Department of the Interior to increase royalty fees to 16.67% from 12.5%, set in 1920. Congress also specified that the minimum bid at auction for drilling leases should increase from $2 per acre to $10 per acre.
But the jump in bond payments, the first since 1960, was decided by the Biden administration, not Congress. The bond comes in response to claims from environmental advocates, watchdog groups and the U.S. General Accounting Office that the bond does not cover the cost of cleaning up abandoned, uncapped wells, leaving the burden on taxpayers. .
“For too long, taxpayers have been forced to pay for these ridiculously low royalty rates, rents and minimum bids,” said Autumn Hanna, vice president of the fiscal watchdog group Taxpayers for Common Sense. “We have lost billions of dollars in a broken leasing system.” “To add insult to injury, taxpayers were left with the bag of damages from wells stranded by oil and gas companies, long after they had already reaped the benefits. We own these resources. The time has come for them to receive fair compensation.”
The new rules increase the minimum deposit for private drilling leases from $10,000 to $150,000. The bond amount for drilling leases on multiple public lands in one state would increase from $25,000 to $500,000. This change would replace the existing requirement that companies secure a single $150,000 bond as insurance for multiple damaged and abandoned wells anywhere in the country.
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Oil and gas companies said the changes, which could take effect in as little as 60 days, would negatively impact fossil fuel production and damage the economy.
“The real losers in this misguided policy are the states and local governments whose annual budget obligations depend on revenue from the federal extraction industry,” said Dan Naerts, chief operating officer of the Independent Petroleum Association of America. said. “Rather than take seriously its mission to be good stewards of federal lands for the betterment of the American people, the Biden administration is using the Western Continues to ignore people in cities and communities everywhere. Cuts America's oil and natural gas production.”
Last year, the United States produced more oil than any other country in history.
The oil and gas industry will continue to receive nearly a dozen federal tax incentives, including incentives for domestic production and write-offs for overseas production. Estimates of the total amount vary widely, but the Fossil Fuel Subsidy Tracker run by the Organization for Economic Co-operation and Development calculated the total amount to be about $14 billion in 2022.
But higher bond prices could make drilling unaffordable for smaller oil and gas producers, said Kathleen Sgamma, president of the Western Energy Alliance, an association of independent oil and gas companies. said. “They are ridiculously high and ridiculously out of touch with the issue,” she said. “They can actually put businesses out of business and create new orphan wells.”
The Department of the Interior estimates that there are 3.5 million abandoned oil and gas wells in the United States. When oil and gas wells are abandoned without being properly sealed, as can happen when a company goes bankrupt, methane, a powerful global warming pollutant that is the main cause of global warming, is released from the well. There is a possibility of leakage.
The Biden administration has had to navigate difficult terrain regarding fossil fuel extraction on public lands and federal waters, which accounts for nearly a quarter of the nation's greenhouse gas emissions.
As a candidate, Biden promised “no more drilling on federal lands.” Period, period, period. '' He also called for an end to billions of dollars in annual tax cuts for oil and gas companies within his first year in office.
But since Biden took office, his administration has continued selling drilling leases, forced by court rulings. In its first two years, the Biden administration approved more oil and gas drilling permits (more than 6,900) than the Trump administration approved during the same period (more than 6,172). Congress did nothing to repeal tax breaks for oil and gas companies.
Environmentalists have criticized the Biden administration's final approval early last year of a massive $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” over fossil fuels that threatens the nation's economy and national security.
Former President Donald J. Trump blamed Biden's policies for economic inflation at a rally in January. “He caused inflation, and it would have been easy not to do that. It was just energy. Remember, gasoline, fuel, oil, natural gas rose to impossible levels.” said Trump, who is running to unseat Biden. “That's what caused the inflation, and we're going to continue to train, so we're going to bring the inflation down. We're going to drill, baby, we're going to drill. We're bringing it down significantly.”
Last month, the Republican-controlled House of Representatives passed a bill sponsored by Colorado Rep. Lauren Boebert that would force the administration to roll back new royalty regulations, but the bill is unlikely to pass in the Democratic-controlled Senate. There are almost no