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Thursday, January 27, 2022

U.S. Oil Drilling Review Proposes Higher Fees, Development Curbs

Maritime Activity Reports, Inc.

November 29, 2021

Credit: otmman/AdobeStock

Credit: otmman/AdobeStock

The Biden administration proposed a slew of changes on Friday to the nation's federal oil and gas leasing program, including hiking fees on drilling companies and limiting their access to sensitive wildlife and cultural zones.

The recommendations followed a months-long review aimed at ensuring drilling on federal lands and waters benefits the public. But in a sign of the extreme controversy surrounding the issue, environmental groups slammed the proposals as too weak and the industry criticized them as too harsh.

President Joe Biden's administration launched the review earlier this year in what had widely been seen as a step toward delivering on his election campaign promise to end new fossil fuel drilling on federal acreage to fight climate change.

Under the U.S. federal oil and gas leasing program, the Interior Department must hold regular auctions for the drilling industry to boost domestic energy self-sufficiency and raise money for public coffers.

The Interior Department report, however, said the current program "falls short of serving the public interest" and called for new rules to boost royalty rates, bonding rates, and other fees for producers. Current law requires a minimum royalty rate of 12.5% for oil and gas produced on federal acreage, a level that has not changed in about a century.

The report also proposed new rules to avoid leasing "that conflicts with recreation, wildlife habitat, conservation, and historical and cultural resources," it said.

"Our nation faces a profound climate crisis that is impacting every American," Interior Secretary Deb Haaland said in a statement announcing the recommendations.

"The Interior Department has an obligation to responsibly manage our public lands and waters – providing a fair return to the taxpayer and mitigating worsening climate impacts."

The American Petroleum Institute, which represents the U.S. oil and gas industry, criticized the proposals, saying they would heap costs on domestic energy producers at a time of already-high retail gasoline prices.

Environmental groups including the Center for Biological Diversity and Food & Water Watch, meanwhile, objected to the proposals as too weak.

"These trivial changes are nearly meaningless in the midst of this climate emergency, and they break Biden's campaign promise to stop new oil and gas leasing on public lands," said Randi Spivak, CBD's public lands director.

"Greenlighting more fossil fuel extraction, then pretending it's OK by nudging up royalty rates, is like rearranging deck chairs on the Titanic,” she said.

About a quarter of the nation's oil and gas comes from federal leases and the program raises billions of dollars for federal and state budgets.

LONG DELAYED REPORT

The Interior Department had meant for the leasing report to be released by early summer but repeatedly delayed it without explanation.

The department had also attempted to suspend oil and gas leasing during the program review, but was forced to move ahead with auctions after several oil and gas producing states sued in federal court.

A federal auction of millions of acres in the U.S. Gulf of Mexico this month, for example, generated more than $190 million in high bids, the highest since 2019, with major buyers including Exxon Mobil Corp, Chevron Corp, BP Plc and Shell.

Haaland has said she wants to reduce the carbon footprint of the nation's federal lands and waters by encouraging leasing for renewable energy sources such as wind, solar and geothermal instead of fossil fuels.

Biden, meanwhile, has set a target to decarbonize the U.S. economy - the world's second-largest greenhouse gas emitter - by the year 2050, in part by encouraging a transition away from fossil fuels to renewables. 

(Reporting by Jarrett Renshaw in Philadelphia, Valerie Volcovici in Washington and Nichola Groom in Los Angeles Writing by Richard Valdmanis Editing by Frances Kerry and Matthew Lewis)

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