An oil well is seen east of Casper, Wyo., on February 26, 2021. The Biden administration is increasing the royalty fees companies pay for oil and natural gas extracted from the lands. federal.
Mead Gruver / AP
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Mead Gruver / AP
An oil well is seen east of Casper, Wyo., on February 26, 2021. The Biden administration is increasing the royalty fees companies pay for oil and natural gas extracted from the lands. federal.
Mead Gruver / AP
BILLS, Mont. The Interior Department on Friday said it is moving forward with the sale of its first onshore oil and natural gas drilling leases under President Joe Biden, but will drastically increase tax rates for companies as Federal officials weigh efforts to combat climate change in the face of pressure to lower high gasoline prices.
The royalty rate for new leases will increase from 12.5% to 18.75%. That’s a 50% jump and marks the first increase in royalties for the federal government since they were introduced in the 1920s.
Biden suspended the new lease just a week after taking office in January 2021. A federal judge in Louisiana ordered the resale to resume, saying that Interior officials did not offer “an explanation.” reasonable” for their cancellation.
The government held a foreign rental auction in the Gulf of Mexico in November, although a court later block that sale before the lease is issued.
Friday’s announcement comes amid pressure on Biden to expand US crude production as the pandemic and war in Ukraine affect the global economy and fuel prices have skyrocketed. Democrats face calls from within their own party to do more to curb emissions from fossil fuels that are causing climate change.
Officials said leases for 225 square miles (580 square kilometers) of federal land mainly in the West will go up for sale on Monday. The parcels represent about 30 percent less land than officials proposed for sale in November and 80 percent less than what was initially proposed by the industry.
The sales announcements will cover rental decisions in nine states – Wyoming, Colorado, Utah, New Mexico, Montana, Alabama, Nevada, North Dakota and Oklahoma.
Interior Department officials declined to say which states will have the parcels for sale or break down the amount of land by state, saying the information would be included in Monday’s sales announcement. They said the reduced acreage offered reflects a focus on leasing in locations near existing oil and gas developments, including pipelines.
Hundreds of public parcels of land previously nominated by companies for lease have been excluded from the upcoming sale because of concerns about wildlife harmed by the rig.
At the time, officials said burning fuel from the remaining leases could cause billions of dollars in climate change impacts. Fossil fuels extracted from public lands account for about 20% of U.S. energy-related greenhouse gas emissions, making them a top target for climate activists who want to stop to rent.
Republicans want more drilling, saying it will strengthen US energy independence and help lower crude prices. However, oil and gas companies have been hesitant to expand drilling operations because it is uncertain how long the high prices will continue.
Friday’s announcement comes after Interior officials raised the prospect of higher royalty rates and less land for drilling in a rental reform report issued last year.
“For too long, federal oil and gas leasing programs have prioritized the needs of the extractive industries,” said Minister Deb Haaland. “Today, we begin to re-establish how and what we consider the highest and best use of Americans’ resources.”
But the move has drawn condemnation from both sides: Environmentalists decry the long-delayed decision to keep revenue unchanged, while oil and gas industry representatives say the royalty fees are high. will prevent drilling operations.
Nicole Ghio with environmental group Friends of the Earth said Biden is putting the profits of the oil industry before future generations will have to deal with the worsening consequences of climate change.
“If Biden wants to be a climate leader, he must stop auctioning our public lands to Big Oil,” Ghio said in an emailed statement.
American Petroleum Institute vice president Frank Macchiarola said officials had removed some of the most important shipments that companies wanted to drill and added “new barriers” that would discourage companies from investing in the country. drilling on public land.
The rentals and royalties that companies pay for oil and gas production have generated more than $83 billion in revenue over the past decade. Half of the money from onshore drilling will go to the state where it occurs.
Most states and many private land owners require companies to pay royalty rates higher than 12.5%, with some states charging 20% or more, according to federal officials.
The royalty rate on oil produced from federal reserves in the deep waters of the Gulf of Mexico is 18.75%. In a later canceled November auction, energy companies including Shell, BP, Chevron and ExxonMobil offered a pool of $192 million for offshore drilling rights in the Gulf.
Newly developed leases could continue to produce crude long after 2030, when Biden aims to reduce greenhouse gas emissions by at least 50%, compared with 2005 levels, scientists say. says the world needs to hit that target within the next decade to avoid catastrophic climate change.
Economists say higher royalty rates would have a relatively small effect on global emissions, because any cuts in oil and gas from federal lands would be partially offset as large as fuel from other sources.
