Federal Leasing Costs Hiked Under Democrats’ New Inflation and Climate Bill

Even window shopping for acreage, or submitting an official expression of interest in an area for potential auction by federal land authorities, would carry a $5 per acre cost if the bill is passed.

Federal Leasing Costs Hiked Under Democrats’ New Inflation and Climate Bill

“The bottom line is that the 33% increased royalty rate along with several new and higher fees make this bill the Energy Inflation Expansion Act—there’s no reduction as the ill-named bill asserts,” said Kathleen Sgamma, president of the industry group Western Energy Alliance. (Source: Shutterstock.com)

New climate and budgetary legislation announced on July 27 by Senate Democrats—including longtime holdout Joe Manchin, D-W.Va.—includes multiple increases on the cost of doing business on federal lands. 

The Inflation and Reduction Act of 2022, which was long under negotiation, attempts to address climate change, corporate taxes, health care and inflation but also includes many provisions rewriting the rules on how much oil and gas companies pay for royalties and introduces a fee just for window shopping. Also included are higher bonding requirements for the plugging and abandonment of wells.

For both onshore and offshore leasing, the bill specifies increasing the rate of governmental royalty payments, currently set at 12.5%, to a range of 16.67% to 18.75%.

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Darren Barbee

Darren Barbee is senior editor for Oil and Gas Investor magazine.