Interior Department calls for oil and gas leasing updates, but not ending production

By: - November 29, 2021 9:56 am

The U.S. Interior Department has recommended increased fees for oil and gas exploration on federal lands. (Photo by Bureau of Land Management)

The U.S. Interior Department recommended increased fees for oil and gas exploration on federal lands as part of a long-awaited report that environmental groups said didn’t go far enough in limiting fossil fuels and Republicans derided as an attack on domestic producers.

The report, ordered by President Joe Biden during his first week in office, focuses on fiscal reforms, noting that energy exploration on federal lands and waters shortchanges taxpayers by failing to recoup fair value for the use of national resources — even without accounting for the environmental and climate harm oil and gas cause.

“The Interior Department has an obligation to responsibly manage our public lands and waters — providing a fair return to the taxpayer and mitigating worsening climate impacts — while staying steadfast in the pursuit of environmental justice,” Interior Secretary Deb Haaland said Friday in a release. “This review outlines significant deficiencies in the federal oil and gas programs, and identifies important and urgent fiscal and programmatic reforms.”

In the report, Interior recommended raising the 12.5% royalty rate for federal onshore leasing, managed by the Bureau of Land Management. The federal rate is below what most states charge for the use of state land. Colorado’s rate is 20%, Montana’s is 16.67%, New Mexico’s is 18.75%-20% and Texas’ is 20%-25%.

For the Bureau of Ocean Energy Management’s offshore leases, the report recommends leasing smaller areas at a time.

The report also calls for limiting non-competitive leases and leases for low-potential lands, and for increasing the minimum bid for onshore development.

Leases that don’t sell at auction for the minimum $2 per acre, are given to the first company to pay a nominal administrative fee, the report said. Companies are much less likely to develop parcels they buy for that little, leaving the land locked up and not available for conservation or recreation, the report said.

Interior also recommended raising bonding rates, the upfront fee oil and gas companies pay before drilling to ensure compliance with the lease terms, including properly decommissioning a well. So-called orphan wells that aren’t properly capped can leak methane for decades. Federal bonding rates have not been raised in 60 years, the report said.

 Environmental groups want more action; GOP blasts ‘attack’ on energy

During a months-long pause on new oil and gas leasing, some groups lobbied the administration to end oil and gas development on federal lands entirely as part of a plan to reach its climate goals.

The report does not approach that level of climate ambition.

While some of the policy recommendations, if enacted, could have marginal environmental effects — limiting leasing on unproductive lands frees those lands to be used for conservation, for example — the report is largely silent on the industry’s climate impacts and the administration’s plans to address them.

That silence disappointed some environmental groups that had hoped for stronger action. Erik Schlenker-Goodrich, executive director of the advocacy group Western Environmental Law Center, said in a statement the report did not fulfill Biden’s policy promises, nor meet the need for climate action.

“We’re sympathetic to the political gauntlet the Biden administration must run,” he said. “But it had a choice to run it with power, speed, and agility. Instead, it’s running that gauntlet weak, slow, and tentative. This report does little but rearrange the deck chairs of the federal public lands oil and gas program, treating these lands as nothing more than a commodity to be exploited by oil and gas CEOs and Wall Street investors.”

Other groups, including the League of Conservation Voters, praised the report’s recommendations but called for more action from Congress and the administration.

Rep. Raúl Grijalva, an Arizona Democrat who chairs the House Natural Resources Committee, applauded the report for charting a path to “long overdue reforms” of federal energy leasing, but said the measures still fell short of the climate action the administration must take.

“The administration needs to manage public lands and waters consistent with its climate commitments, and today’s report does not offer a plan to do that,” Grijalva said. “What it does offer is a set of important and long overdue reforms to the federal fossil fuel leasing program, which until now has been a public subsidy for oil and gas drilling and extraction.”

The report, which had been expected in the summer, comes just days after Biden announced he would release 50 million barrels of oil from the Strategic Petroleum Reserve — even as he and Energy Secretary Jennifer Granholm called for a long-term transition to clean energy.

Frank Macchiarola, a vice president for policy, economic and regulatory affairs at the American Petroleum Institute, said the report contradicted Biden’s rationale for releasing the Strategic Petroleum Reserve barrels.

“The Biden Administration is sending mixed signals,” he said in a statement. “Days after a public speech in which the White House said the president ‘is using every tool available to him to work to lower prices and address the lack of supply,’ his Interior Department proposed to increase costs on American energy development with no clear roadmap for the future of federal leasing.”

Republicans have for months criticized inflation that has occurred during Biden’s presidency, with some blaming his policies they say limit energy production.

Senate Energy and Natural Resources ranking Republican John Barrasso of Wyoming blasted the report in a Friday statement.

“President Biden’s war on American energy is unrelenting,” he said. “This report shows the administration’s continued efforts to shut down American oil and gas production on federal lands and waters. The Department of the Interior wants to increase costs for oil and gas producers at a time when energy prices are climbing for the American people.”

Grijalva’s Republican counterpart, Bruce Westerman of Arkansas, said Friday the report went too far in regulating oil and gas development. Increased reviews, royalty rates and other regulatory actions would be used to limit domestic production, he said.

“DOI is quietly releasing this report the Friday of a holiday weekend, months after they promised it, in the hopes that no one notices their continued attacks on domestic energy,” Westerman said in a statement. “After keeping the entire energy industry in limbo for months, DOI’s report shows they have only just begun their war on safe, reliable, domestic energy.”

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Jacob Fischler
Jacob Fischler

Jacob covers federal policy as a senior reporter in the States Newsroom Washington bureau. Based in Oregon, he focuses on Western issues as well as climate, energy development, public lands and infrastructure.

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