On Friday, the Biden administration issued its long-awaited report on the federal oil and gas leasing program highlighting the program’s dire need for reforms to ensure fairer returns to taxpayers, require companies to meet their reclamation obligations, and guarantee public participation and tribal consultation in the leasing process.
The report, which President Joe Biden commissioned last January, outlined a series of primarily fiscal reforms for the federal oil and gas program, which the Department of the Interior said currently “fails to provide a fair return to taxpayers, even before factoring in the resulting climate-related costs that must be borne by taxpayers.”
Environmental groups expressed concerns about the review and called for more urgent action to be taken to address the climate crisis.
“The report ignores the impacts of drilling public lands and waters have on the climate crisis, so what was supposed to be a ‘comprehensive’ assessment falls far short,” said Lisa McCormick, a New Jersey environmentalist who has called for a transition away from fossil fuels to a clean energy economy.
“If the administration wanted Americans to believe it is taking these issues seriously, the information would not have been released on a day when nobody is paying attention,” said McCormick. “You can tell someone wants to diminish the significance of a story when it is buried in the trash on a Friday, but when it is dropped late on Friday, November 26, 2021— a day known as ‘Black Friday’ when most Americans are recovering from over-consumption on Thanksgiving or bargain hunting in anticipation of holiday sales—it suggests they want no attention at all. The content of this report shows why the Biden team is being shy.”
“These trivial changes are nearly meaningless in the midst of this climate emergency, and they break Biden’s campaign promise to stop new oil and gas leasing on public lands,” said Randi Spivak, public lands director at the Center for Biological Diversity. “Greenlighting more fossil fuel extraction, then pretending it’s OK by nudging up royalty rates, is like rearranging deck chairs on the Titanic. There’s no time left for baby steps that let the fossil-fuel industry wreak even greater havoc on the Earth.”
“The report lays out everything we already know and have been saying for years. The federal oil and gas program is in dire need of reforms to ensure fairer returns to taxpayers and to ensure that industry cleans up its mess. The report clearly demonstrates the urgency for Congress to act now and address the issues outlined in the report, and for the Senate to pass the oil and gas reforms recommended by Interior that are contained in the House-passed version of the Build Back Better Act,” said Sara Cawley, a legislative representative at Earthjustice.
Athan Manuel, director of the Sierra Club’s Lands Protection Program, urged the Biden administration to phase out new oil and gas leasing altogether and said, “we call on Congress to include these reforms in the final Build Back Better Act to ensure that our public lands are part of the climate solution, instead of enriching oil company CEOs at the public’s expense.”
“Our nation faces a profound climate crisis that is impacting every American. 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,” said Interior Secretary Deb Haaland. “This review outlines significant deficiencies in the federal oil and gas programs, and identifies important and urgent fiscal and programmatic reforms that will benefit the American people.”
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 of $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.
The moratorium drew sharp criticism from congressional Republicans and the oil industry, even as many environmentalists and Democrats said Biden should make the leasing pause permanent.
The American Petroleum Institute, the top lobbying group for the oil industry, said Interior was proposing to “increase costs on American energy development with no clear roadmap for the future of federal leasing.”
The report recommends hiking federal royalty rates for oil and gas drilling, which have not been raised for 100 years. The federal rate of 12.5% that developers must pay to drill on public lands is significantly lower than many states and private landowners charge for drilling leases on state or private lands.
The report also said the government should consider raising bond payments that energy companies must set aside for future cleanup before they drill new wells. Bond rates have not been increased in decades, the report said.
The Bureau of Land Management, an Interior Department agency, should focus leasing offers on areas that have moderate to high potential for oil and gas resources and are close to existing oil and gas infrastructure, the report said.
The White House declined to comment Friday, referring questions to Interior.
The federal leasing program has drawn renewed focus in recent weeks as gasoline prices have skyrocketed and Republicans complained that Biden policies, including the leasing moratorium, rejection of the Keystone XL oil pipeline and a ban on oil leasing in Alaska’s Arctic National Wildlife Refuge, contributed to the price spike.
Biden on Tuesday ordered a record 50 million barrels of oil released from America’s strategic reserve, aiming to bring down gas prices amid concerns about inflation. Gasoline prices are at about $3.40 a gallon, more than 50% higher than a year ago, according to the American Automobile Association. Oil prices dropped about 13% Friday as a new coronavirus variant first detected in South Africa appeared to be spreading across the globe.
The Biden administration conducted a lease sale on federal oil and gas reserves in the Gulf of Mexico last week, after attorneys general from Republican-led states successfully sued in federal court to lift the suspension on federal oil and gas sales that Biden imposed when he took office.
Energy companies including Shell, BP, Chevron and ExxonMobil offered a combined $192 million for offshore drilling rights in the Gulf, highlighting the hurdles Biden faces to reach climate goals dependent on deep cuts in fossil fuel emissions.
The leases will take years to develop, meaning oil companies could keep producing crude long past 2030, when Biden has set a goal to lower greenhouse gas emissions by at least 50%, compared with 2005 levels. Scientists say the world needs to be well on the way to that goal over the next decade to avoid catastrophic climate change.
Yet even as Biden has tried to cajole other world leaders into strengthening efforts against global warming, including at this month’s U.N. climate talks in Scotland, he’s had difficulty gaining ground on climate issues at home.
The administration has proposed another round of oil and gas sales early next year in Wyoming, Colorado, Montana and other states. Interior Department officials proceeded despite concluding that burning the fuels could lead to billions of dollars in potential future climate damages.
Emissions from burning and extracting fossil fuels from public lands and waters account for about a quarter of U.S. carbon dioxide emissions, according to the U.S. Geological Survey.