Offshore staff

WASHINGTON, DC – The Biden administration on Friday proposed reforms to the country’s oil and gas leasing program that would raise costs for energy companies to drill on public lands and water but stopped short of recommending an end to leasing on public lands.

Published by the Interior Department, the report recommended increasing royalty rates and rents for drillers; prioritizing leasing in areas with known resource potential; and avoiding leasing in areas that can be developed to protect wildlife habitat, recreation and cultural resources.

The report completes a review that President Joe Biden ordered in January. The president directed a halt to new federal oil and gas lease sales on public lands and waters, but a Louisiana federal judge blocked the administration’s suspension in June.

Notably, the report did not indicate that the administration would take climate change impact into account when approving new leases.

The report did say that the federal oil and gas leasing program “fails to provide a fair return to taxpayers and inadequately accounts for its harmful impact on the environment.” It called for new rules to hike royalty rates, bonding rates and other fees for drillers. The minimum royalty rate is currently 12.5% for oil and gas production on federal lands.

The report commented that the federal oil and gas program's fiscal components are “particularly outdated, with royalty rates that have not been raised for 100 years.”

“Consideration should be given to raising royalty rates and, to the extent allowed by statute, to increasing the current minimum levels for bids, rents, royalties, and bonds,” the report stated.

The report also encouraged congressional action “on pending legislation to provide fundamental reforms to the onshore and offshore oil and gas programs.”

In a note to its members, NOIA said that the Interior Department report “didn’t have any major shocks and largely reflected the priorities that the administration has been pointing to for months.” NOIA pointed out that the report did “not issue any new specific recommendations on royalty rates [but says] that they are reviewing recent recommendations from the GAO.”

11/29/2021