The U.S. Department of the Interior (DOI) announced on July 20 new steps to revise the Bureau of Land Management’s (BLM) oil and gas leasing regulations, ensuring a balanced approach to development and drilling that will not conflict with the protection of important wildlife habitats or cultural sites, as well as provide a fair return to taxpayers.
“The Interior Department has taken several steps over the last two years to ensure the federal oil and gas program provides a fair return to taxpayers, adequately accounts for environmental harms and discourages speculation by oil and gas companies,” said Principal Deputy Assistant Secretary for Land and Minerals Management Laura Daniel-Davis. “This new proposed rule will help fully codify those goals and lead to more responsible leasing and development processes.”
Onshore royalty rates have not been raised in over 100 years prior to the Biden-Harris Administration taking office, bonding levels have not been raised for 60 years and minimum bids and rents remained the same for over 30 years. The proposed rule would change this by updating outdated fiscal terms of the onshore federal oil and gas leasing program, increasing returns to the public and discouraging speculators.
The American Petroleum Institute (API) expressed displeasure with the changes proposed by the DOI, saying the proposal comes on the back of new data from Morning Consult finding 88% of people polled believe it is important to produce natural gas and oil in the U.S., with 90% believing it will strengthen the American economy.
“Amidst a global energy crisis, this action from the Department of the Interior is yet another attempt to add even more barriers to future energy production, increases uncertainty for producers and may further discourage oil and natural gas investment,” API’s press release said. “This is a concerning approach from an administration that has repeatedly acted to restrict essential energy development.”
Many of the proposed changes center around the Inflation Reduction Act (IRA). Royalty rates for leases issued for 10 years after the effective date of the IRA are 16.67% and after Aug. 16, 2032, the rate of 16.67% will become the minimum royalty rate. Minimum bids will be increased from $2/acre to $10/acre, or fraction thereof, and after 10 years the amount will be regularly adjusted for inflation. An expression of interest fee of $5/acre will also be established.
Other key elements of the proposal include bonding requirements increasing the minimum lease bond amount to $150,000 and the minimum statewide bond to $500,000, as well as the protection of wildlife and cultural resources.
“This proposal to update BLM’s oil and gas program aims to ensure fairness to the taxpayer and balanced, responsible development as we continue to transition to a clean energy economy,” said BLM Director Tracy Stone-Manning. “It includes common sense and needed fiscal revisions to BLM’s program, many directed by Congress.”
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