The document calls for increasing the government’s royalty rate — the 12.5 percent of profits fossil fuel developers must pay to the federal government in exchange for drilling on public lands — to be more in line with the higher rates charged by most private landowners and major oil- and gas-producing states. It also makes the case for raising the bond companies must set aside for cleanup before they begin new development.
Though Friday’s report focuses on the fiscal case for updating the leasing program, Interior officials say they will also consider how to incorporate the real-world toll of climate change into the price of permits for new fossil fuel extraction. The Biden administration this year set its “social cost of carbon” at $51 per ton of emissions, but suggested the number could go even higher as researchers develop new estimates of the damage caused by raging wildfires, deadly heat, crop-destroying droughts and catastrophic floods.
“The direct and indirect impacts associated with oil and gas development on our nation’s land, water, wildlife, and the health and security of communities — particularly communities of color, who bear a disproportionate burden of pollution — merit a fundamental rebalancing of the federal oil and gas program,” the report says.
But many activists were dissatisfied with the document, which they say breaks President Biden’s campaign promise to ban new oil and gas leasing on public lands.
“We are destroying life on Earth by extracting fossil fuels,” said Randi Spivak, public lands program director at the Center for Biological Diversity. “The process needs to end, not be reformed.”
Economic analyses suggest the changes to royalty and bonding rates will increase revenue, but they will not significantly curb carbon emissions.
The American Petroleum Institute’s Frank Macchiarola criticized the proposal for increasing the cost of fuel development in the United States.
“During one of the busiest travel weeks of the year when rising costs of energy are even more apparent to Americans, the Biden Administration is sending mixed signals,” Macchiarola, API’s senior vice president for policy, economics and regulatory affairs, said in a statement.
The long-awaited Interior Department report comes just days after Biden released 50 million barrels of oil from the Strategic Petroleum Reserve in an effort to combat rising gasoline prices. Earlier this month, Biden also approved the largest sale of offshore oil and gas leases in U.S. history, which a government analysis said could generate up to 1.1 billion barrels of oil and 4.42 trillion cubic feet of natural gas in the coming decades.
The report also coincides with efforts from congressional Democrats to pass a suite of oil and gas leasing changes included in the Build Back Better budget deal. The version of the bill passed by the House last month includes provisions that would raise the minimum royalty rate for onshore drilling for the first time in a century, shorten the length of leases from 10 to five years and eliminate a noncompetitive program that lets speculators buy leases for as little as $1.50 per acre.
That legislation now rests in the hands of the Senate, where Energy and Natural Resources Committee Chairman Joe Manchin III (D-W.Va.) — a powerful Democrat from a fossil fuel-producing state — has said he wanted to review the Interior Department’s leasing report before agreeing to new laws.