The bases for extracting oil and gas on public lands have been stagnant for decades. Oil and gas companies have paid 12.5 percent in royalties to the federal government for drilling on public lands for more than a century, far below the prices charged by many Western countries. Companies should also publish bonds and financial instruments that ensure taxpayers won’t be left with the environmental cleanup bag if a driller goes bankrupt. But those bonds were set in 1960 at $10,000 per lease, a fraction of the true cost of plugging and cleaning up the oil wells companies leave behind.
Governance groups and environmentalists have long argued that these rules act as subsidies for fossil fuels, reducing taxpayers and encouraging oil and gas extraction at a time when the planet is warming at a dangerous rate. The Biden administration is now trying to rectify this imbalance.
On Thursday, the Ministry of the Interior announced a comprehensive set of reforms aimed at protecting public lands, saving taxpayers money, and holding oil and gas companies accountable for cleaning up the environment. The new proposed rule raises the minimum royalty rate to 16.7 percent, raises minimum leases from $2 per acre to $10 per acre, and increases the bond minimum from $10,000 to $150,000 per lease. The rule also prioritizes leasing in areas where oil and gas infrastructure already exists, leaving more room for development of renewables, and adding protections for wildlife habitats and cultural sites.
“This proposal to modernize BLM’s oil and gas program is intended to ensure taxpayer justice and balanced and responsible development as we continue the transition to a clean energy economy,” Tracy Stone Manning, director of the Bureau of Land Management, said in a press release. “It includes the common sense and financial reviews needed for the BLM program, many of which Congress has directed.” (The Inflation Reduction Act, the climate law that Biden signed, mandated higher royalty rates and minimum bids.)
When an oil and gas well reaches the end of its life, it needs to be properly plugged on and off. By pouring concrete into the well, operators ensure that methane and brine do not rise to the surface and pollute the ground and air. But oil and gas companies sometimes go bust, shy away from their clean-up responsibilities, and abandon wells. These “orphan” wells have been a major concern of public land managers.
In such cases, bonds collected by the federal government should help cover the costs of the cleanup. But since at least 1960, the BLM has required $10,000 per lease and $25,000 for multiple leases in the state. Because each lease can contain multiple wells, the government is often left with a few thousand dollars or less to cap a single well even though the cost of a single capping on federal land can range from $20,000 to $140,000.
As a result, abandoned, leaky wells dot the country’s public lands. The Department of the Interior estimates that there are about 15,000 such wells on federal lands. In 2021, Congress appropriated $4.7 billion to clear up clutter, and the Interior Department has disbursed more than $1 billion of that amount to states and tribes. The agency indicated in a press release that the new Interior Ministry proposal “aims to prevent this (financial) burden from falling on the taxpayer in the coming years.”
Environmental groups had a mixed response to the news. Those who had been calling for reforms in the rental program praised the changes, noting that they were “long overdue” and “common sense”. But many also pointed out that fiscal reforms alone were not enough to address the climate impacts of oil and gas extraction, and called on the Biden administration to end leasing altogether. The nonprofit Environmental Center for Biodiversity said the proposal was “cowardly” and that the Biden administration “presents an opportunity to end oil and gas extraction on public lands as the world moves from one climate disaster to the next.”
“While these rules are helpful, the Biden administration’s proposal continues the climate-destroying practice of leasing federal land for drilling, which is completely out of sync with the administration’s climate goals,” Public Citizen president Robert Weissman said in a statement.