In the fourth year of the Biden administration’s efforts to overhaul the nation’s energy industry, the Department of the Interior is changing the rules for companies seeking to lease public lands, including offshore. It is another example of the Biden administration playing favorites in executing its industrial policy. It seeks climate activist votes in the upcoming election.
This all started Jan. 27, 2021, with Biden’s Executive Order 14008 directing the Interior Secretary to “pause new oil and natural gas leases on public lands or in offshore waters pending completion of a comprehensive review and reconsideration of federal oil and gas permitting and leasing practices.” The DOI had to consider “potential climate and other impacts” and adjust oil and gas production royalties to account for “climate costs.” This latest petroleum industry attack will likely have little impact other than angering people.
The offshore leasing pause caused the cancelation of a sale and means fewer future sales. Climate activists praised Biden, but his approval of ConocoPhillips’ Willow Project in Alaska cost him much of that support. Thus, he needs these new restrictions to win back climate activists.
The Energy Act of 2020 drove the renewable energy public lands adjustments. Solar and wind energy development needs more help as if subsidies were not already sufficient. Project capacity fees were cut by 80%. The application process was streamlined to give developers greater certainty. The Bureau of Land Management (BLM) can now accept renewable leasing applications without first going through a full auction. BLM retains the ability to hold competitive auctions where appropriate.
The petroleum industry was treated differently. It was the first comprehensive update to the federal onshore oil and gas leasing framework since 1988. Minimum bonding levels, in place since 1960, and royalty rates for over 100 years, were adjusted. The minimum lease bond was boosted to $150,000 from $10,000, while royalty rates increased to 16.67% from 12.5 percent. Minimum lease bids jumped from $2 to $10 per acre, and delay rentals doubled for the first two years and will escalate over seven years.
The fee increases will barely lift the industry’s contribution to the federal budget. Offshore oil and gas revenues account for most or all of the funding for several federal conservation and restoration programs, which will benefit. They also contribute money to coastal states for coastal preservation and restoration. Will oil and gas companies continue targeting drilling on public lands given fee hikes or move to greener pastures?
