The Biden administration has increased the cost of oil and gas drilling on public lands, raising royalty rates for the first time in a century as part of a sweeping crackdown on the industry ahead of November’s election.
The Bureau of Land Management said on Friday it had finalised a rule to raise 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.
“These are the most significant reforms to the federal oil and gas leasing program in decades, and they will cut wasteful speculation, increase returns for the public, and protect taxpayers from being saddled with the costs of environmental clean-ups,” said Deb Haaland, interior secretary.
The rule comes as President Joe Biden toughens his stance on fossil fuel producers in a bid to mobilise progressive voters in the run-up to this year’s presidential election. His administration also recently moved to restrict offshore drilling leases and froze permits for new liquefied natural gas infrastructure.
But the royalty rise also comes as crude oil prices increase amid fears of supply disruptions due to turmoil in the Middle East — factors that have already pushed up US petrol prices and boosted inflation, just as Biden tries to sell his economic record to voters.
Royalty rates will rise from 12.5 per cent to 16.67 per cent, in line with a change first mandated by the Inflation Reduction Act, Biden’s landmark climate law. Minimum bond requirements, used to pay for the clean-up of abandoned wells, will rise from $10,000 to $150,000 for an individual lease.
Friday’s rule is the latest of several climate rules by federal agencies as Biden races to wrap up his regulatory agenda ahead of November’s vote.
Friends of the Earth, an environmental group, said that while it supported the new royalty rate rise as a way to “curb financial giveaways to Big Oil”, the rule failed “to confront the massive tide of climate emissions stemming from [the interior department’s] leasing programme”.
