U.S. hikes royalty fees for drilling on federal lands for first time in a century

The Biden administration said Friday it is broadly increasing the costs for oil and gas companies to drill on federal lands, including bonding requirements, royalty rates and minimum bids, ahead of the presidential election in November.

The U.S. Department of Interior’s Bureau of Land Management said in its final rule that its federal oil and gas leases will require a minimum bond of $150K and a minimum statewide bond of $500K, compared with a previous $10K lease bond; bond amounts also will be adjusted for inflation every 10 years.

BLM said royalty rates for leases will rise from 12.5% to 16.67%, in line with a change first stipulated in the Inflation Reduction Act, the minimum amount companies can bid at oil and gas auctions will increase to $10/acre from $2/acre, and the rental rate for a 10-year lease will double to $3/acre for the first two years and eventually rise to $15/acre; the fees can be adjusted for inflation after 10 years.

The new rule raises the royalties drillers must pay to the government for the first time since 1920 and the bonds needed to cover the cost of clean-ups for the first time since 1960.

While the new regulations apply only to public lands, which comprise less than 10% of total U.S. production, the announcement drew swift condemnation from energy groups and Republican lawmakers who slammed President Biden for “doing all he can to make it economically impossible to produce energy on federal lands.”

Several environmental groups praised the move, although Friends of the Earth criticized a failure to address the climate impact of fuel extraction on public lands.

Also, Bloomberg reported this week that the Biden administration is set to issue a sweeping plan to block oil and gas development across much of Alaska’s North Slope.

Earlier this week, the Environmental Protection Agency issued a final rule setting limits on toxic pollution from chemical plants and stripping cancer-causing chemicals from drinking water.

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