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Oil and gas companies must pay more to drill on federal lands under the new Biden administration rule

WASHINGTON (AP) — Oil and gas companies will have to pay more to drill on federal lands and meet stricter requirements to clean up old or abandoned wells, under a final rule issued Friday by the Biden administration.

The Interior Department’s rule increases oil drilling royalty rates by more than a third, to 16.67%, in line with the sweeping 2022 climate bill passed by Congress. The previous 12.5% ​​rate that oil and gas companies paid for federal drilling rights had remained unchanged for a century. The federal rate was significantly lower than what many states and private landowners charge for drilling contracts on state or private lands.

The new rule does not go so far as to ban new oil and gas leasing on federal lands, as many environmental groups have urged and as President Joe Biden promised during the 2020 campaign. But officials said the proposal will lead to a more responsible leasing process that delivers better returns for U.S. taxpayers and concentrates oil and gas drilling in areas most likely to be developed, especially those with existing infrastructure and high potential for oil and gas. reserves.

The rule will also increase the minimum lease bond paid by energy companies to $150,000, up from the previous $10,000 set more than 60 years ago. The higher bond requirement is intended to ensure energy companies meet their obligations to clean up drilling sites after they finish drilling or cap abandoned wells.

The plan codifies a number of provisions already in place on an interim basis in the climate law known as the Inflation Reduction Act. It also includes provisions from the 2021 Infrastructure Act and recommendations from a 2021 Department of the Interior report on oil and gas leasing. That report recommended a review of the oil and gas program to identify areas available for energy development limit and increase oil and gas costs. companies to drill on public lands and waters.

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“These are the most significant reforms to the federal oil and gas leasing program in decades, and they will reduce wasteful speculation, increase revenues for the public, and protect taxpayers from the costs of environmental cleanup,” Interior Secretary Deb Haaland said Friday. .

Along with efforts to clean up so-called orphaned or abandoned wells, “these reforms will help protect the health of our public lands and nearby communities for generations to come,” Haaland said. The rule will also ease pressure to develop areas that contain sensitive wildlife habitats, cultural resources or recreational areas, she said.

The new royalty rate set by the climate law is expected to remain in place until August 2032, after which it could be increased. The higher rate would increase costs for oil and gas companies by an estimated $1.8 billion over that period, according to the Interior Department.

The American Petroleum Institute, the oil industry’s main lobbying group, said it was reviewing the rule to ensure that Biden’s Democratic administration encouraged “fair and consistent access to federal resources” used by oil and gas companies used.

“As energy demand continues to grow, oil and natural gas development on federal lands will be fundamental to maintaining energy security, stimulating our economy and supporting state and local conservation efforts,” API Vice said President Holly Hopkins said in a statement. management regulations will jeopardize this critical energy supply.”

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Environmental groups cheered the rule change as a way to bring accountability from energy companies that have long had cheap access to federal lands.

“For far too long, oil and gas companies have taken advantage of giveaways to drill on our public lands. This rule will finally curb some of these wasteful supports for the fossil fuel industry,” said Josh Axelrod, senior policy attorney at the Natural Resources Defense Council. “Communities, conservationists and taxpayer advocates have been demanding these changes for decades, and it’s great news that the Biden administration is taking action today.”

The change in interest rates is a key part of the new rule, officials said. The previous rate of $10,000, set in 1960, was far too low to force companies to clean up old drilling sites and did not cover the potential costs of reclaiming a well, officials said. As a result, taxpayers often have to pay cleanup costs for abandoned or depleted wells when an operator refuses to do so or goes bankrupt. Hundreds of thousands of orphaned oil and gas wells and abandoned coal and hard rock mines pose serious safety risks while causing ongoing damage to the environment.

Over the past two years, the Department of the Interior has made more than $1 billion available through the Infrastructure Act to clean up orphaned oil and gas wells on public land. The new rule should prevent this burden from falling on taxpayers in the future.

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Bureau of Land Management Director Tracy Stone-Manning, whose agency issued the new rule, said it will “help protect critical wildlife habitat, cultural resources and recreational values” while ensuring a fair return for taxpayers. The agency manages more than 245 million acres of public lands, primarily in the West.

Lawmakers were divided by party.

Arizona Rep. Raul Grijalva, the top Democrat on the House Natural Resources Committee, called the rule an important step to rein in oil and gas companies.

“If Big Oil is using our public lands, it stands to reason that they should give American taxpayers a fair return for this privilege,” he said. “That’s why Democrats worked so hard to pass reforms in the Inflation Reduction Act, to restore some balance to a leasing system that has favored polluters for far too long.”

Sen. John Barrasso of Wyoming, the top Republican on the Senate Energy and Natural Resources panel, said the rule imposes unfair costs on energy companies, which will result in less drilling, fewer jobs and greater dependence on Central American oil. East.

“As a candidate, Joe Biden recklessly threatened to end oil and natural gas production on federal lands,” Barrasso said. “As president, he is doing everything he can to make it economically impossible to produce energy on federal lands.”

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This story has been corrected to show that the climate law was from 2022, not 2002.

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