The Interior Department is beginning to implement new strictures on federal oil and gas leasing, a long-held priority of President Joe Biden‘s, as it moves forward with lease sales in compliance with the new Democratic climate law.
The Bureau of Land Management, a sub-agency within the Interior charged with overseeing resource development on federal lands, issued a series of instructional documents on Monday confirming the end of noncompetitive leasing on federal lands and making clear that all new lessees must pay higher rents and royalties than before.
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The guidelines reflect Biden’s and the larger Democratic caucus’s intent to reform the oil and gas leasing program and limit its expansion, which many in the party consider contrary to prudent climate and environmental policy.
BLM’s new “instructional memoranda” also established a clear policy that offices may not favor oil and gas development over other uses of federal lands when carrying out certain duties, taking the recommendation directly from the Biden administration’s review of the oil and gas leasing program released one year ago this Friday.
Several of the new provisions, including higher royalty and rental rates, minimum bid requirement, and the noncompetitive leasing component, were changes in law codified in the Inflation Reduction Act, the green energy and healthcare spending bill Democrats narrowly passed in August.
All lease sales now require a minimum bid of $10 per acre, up from the $2 per acre minimum in place since 1987. The minimum royalty rate, the amount paid on what’s produced on the lease, is raised to 16.67% from 12.5%.
Many environmental groups and Democratic lawmakers, as well as the Interior Department’s review, saw the previous rates as unfair to taxpayers.
The same view motivated the inclusion in the Inflation Reduction Act of a provision ending noncompetitive leasing, which BLM was previously authorized to do if no parties bid on federal parcels during the competitive bidding process.
Some noncompetitive leases have sold for as little as $1.50 per acre, and a 2020 report from the Government Accountability Office concluded that, between 2013 and 2019, average revenues from competitive leases were nearly three times greater than revenues from noncompetitive leases.
Other changes include an amendment to BLM’s process to extend approved application permits to drill, or AAPDs. Administration officials and Democrats in Congress have frequently pointed to the thousands of active-yet-undeveloped AAPDs in deflecting calls from the oil and gas industry to be more favorable toward traditional energy sources in its energy policy.
Speaker Nancy Pelosi and others threatened to take such drilling authorizations away from companies if they wouldn’t drill new wells on them.
Extensions to AAPDs previously “have been a routine matter,” according to analysts at ClearView Energy Partners, but the new BLM memo provides that extensions “are discretionary authorizations and should only be approved when the permit extension serves the public interest.”
Biden campaigned on restricting or ending altogether parts of the federal oil and gas leasing program to reduce greenhouse gas pollution. He ordered a pause on new leasing during his first week in office, but the administration later carried out new lease sales after a judge enjoined Biden’s order.
Although the Inflation Reduction Act instituted reforms to increase costs of oil and gas leasing, it also included provisions bringing back canceled offshore oil and gas lease sales. Other provisions linked the development of renewable energy on federal lands, a Democratic priority, to the continued and regular leasing of lands for oil and gas developments.
The oil and gas provisions were included at the insistence of Sen. Joe Manchin (D-WV), a centrist who opposes more aggressive Democratic policies that would restrict fossil fuels.
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Since the new law passed, the Interior Department has scheduled two of three canceled offshore oil and gas lease sales and reinstated leases that were upheld in court.
The department has also begun the scoping process for onshore lease sales to be carried out in several states next year, including Wyoming, New Mexico, Utah, and Nevada.
