The Interior Department finalized a rule Friday making it more expensive for oil and gas companies to drill on federally controlled lands.
Several of the measures in the rule, such as boosting the rent the government charges oil corporations for utilizing their property and increasing the government’s share of the revenues from that oil, were enacted into law by the Democrats’ Inflation Reduction Act.
The Biden administration would also increase the cost for drillers who abandon their oil wells after use rather than cleaning them up. The administration claims that current bonding rates do not do enough to ensure that businesses clean up after themselves.
The government hailed the modifications as the first “comprehensive update” to the laws governing 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,” Deb Haaland, Secretary of the Interior, said in a statement.
The order comes one day after the administration announced plans to reduce costs for producing renewable energy on public land.
Specifically, the rule raises the royalty rate, which is the government’s share of oil and gas generated on public lands, from 12.5% to 16.67%.
It also raises rent rates from $1.50 per acre for the first five years of a lease, $2 per acre for the next five, to $3 per acre for the first two years, and $5 per acre for the next six, rising to $15 per acre afterward.
Furthermore, the rule raises the minimum amount that businesses can bid for when leasing areas for drilling to $10 per acre, up from $2 per acre, and adjusts the price for inflation.
The rule drew criticism from members of the oil and gas industry, who argued that the bonding rules, which seek to disincentivize abandoning wells by collecting money for their cleaning upfront, might make public land 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 also stated that the bonding change, in particular, is “way out of proportion” to the issue.
Meanwhile, environmental campaigners applauded the decision.
“These new regulations are the type of common-sense adjustments that the federal oil and gas leasing program has required 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 behind are over,” said Athan Manuel, the Sierra Club’s lands protection program director, in a written statement.
