United States: On Friday, President Joe Biden’s administration finished setting up the regulations aimed at improving financial flow and solving the environmental problems related to oil and gas excavation on public lands.
Decades of Criticism
These new regulations result from decades during which environmentalists and tax-paying associations critiqued the federal oil and gas leasing program for not profiting the public. Many of the changes codify the former President’s landmark climate change law, the 2022 Inflation Reduction Act (passed under the Biden administration), as reported by Reuters.
According to the revised policy, petroleum and gas firms will pay higher rates for bonding, which covers the expenses of plugging abandoned oil and gas wells. They will also pay higher lease rents, minimum auction bids, and royalty rates for the fuels they dig out. This includes restrictions on drilling in areas of particular sensitivity to wildlife and culture.
Significant Impact
“These are the most significant reforms to the federal oil and gas leasing program in decades, and they will cut wasteful speculation, increase public returns, and protect taxpayers from being saddled with the costs of environmental cleanups,” Interior Secretary Deb Haaland said in a statement.
About 10% of the country’s oil and gas well drilling is performed on federal land. A trade group from the oil and gas industry predicted that the costs of obtaining fuels from federal lands could make the US more dependent on foreign energy supplies.
Industry Concerns
“Overly burdensome land management regulations will put this critical energy supply at risk,” American Petroleum Institute Vice President of Upstream Policy Holly Hopkins said in a statement.
As the presidential candidate, Biden had promised in 2019 that federal oil and gas drilling would be ended along with other climate initiatives. The IRA, however, was a compromise, as it tolerated continued oil and gas drilling rights auctions on government-owned lands by extending the practice for at least ten more years as a concession to the powerful fossil fuel lobby.
Drillers must set up a bankroll to fund future clean-up, but a 2019 estimate revealed that bonding did not cover much.
Financial Requirements
Due to these new regulations, minimum lease bonds will increase from USD 10,000 to USD 150,000 (a quantum in cognizance since 1960).
The percentage royalty will climb to 16.67% from 12.5%, and the minimum bid price for oil and gas auctions will increase from USD 2 to USD 10 per acre. The rental rate per acre for the first 10-year lease will be USD 3, double for the first two years, and then maximal rent for the last few years will be USD 15 per acre. The fees will be adjusted to inflation after ten years.
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