The Biden administration on Friday finalized a rule that will make it more expensive for oil and gas companies to drill on public lands, despite soaring energy prices and inflation still trending upwards.
The Department of the Interior announced it has revised the Bureau of Land Management’s (BLM) oil and gas leasing regulations, which will raise royalty rates for the first time in 100 years and update the federal onshore oil and gas leasing framework. Under the new rule, the minimum royalty rate the government is paid will jump from 12.5% of revenue to 16.67%.
The move also increased the amount of the bonds that companies must secure before they start drilling tenfold – from a bond minimum of $10,000 set in 1960 to $150,000.
Several of the provisions in the rule were already codified by the Inflation Reduction Act, such as raising the rent the government charges to oil companies for using its land and increasing the government’s share of the profits from that oil.
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The Department of the Interior said the rule will ensure a balanced approach to the development of the lands, provide a fair return to taxpayers and help steer oil and gas development away from important wildlife habitat and important cultural sites.
BLM will also preference land lease offers that are close to existing infrastructure or have a high potential for oil and gas production.
"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 cleanups," Interior Secretary Deb Haaland said.
"Alongside the historic investments we are making through President Biden’s Investing in America Agenda to clean up orphaned oil and gas wells, these reforms will help safeguard the health of our public lands and nearby communities for generations to come."
The move forms part of President Biden’s climate agenda as he seeks to move the U.S. away from its reliance on fossil fuels and shift toward a carbon-free future of renewable energy.
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Nevertheless, the U.S. oil and gas industry has flourished under President Joe Biden.
Following the Russian invasion of Ukraine and subsequent sanctions, oil producers worldwide made record profits. The profits of the top five publicly traded oil companies – BO, Shell, Exxon, Chevron, and TotalEnergies – amounted to $410 billion during the first three years of the Biden administration, a 100% increase over the first three years of Donald Trump’s presidency, according to data compiled by Reuters.
Inflation, meanwhile, accelerated in March for the third straight month, keeping prices painfully high for millions of Americans and likely delaying any interest rate cuts by the Federal Reserve.
The Labor Department said Wednesday that the consumer price index, a broad measure of the price of everyday goods including gasoline, groceries and rent, rose 0.4% in March from the previous month. Prices climbed 3.5% from the same time last year, above the 3.2% figure recorded in February.
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Former President Trump has argued that inflation is directly linked to energy prices and has vowed to ramp up production if he gets elected to office.
"Remember this: Gasoline, fuel, oil, natural gas went up to a level that it was impossible," Trump said at a campaign rally in January.
"That’s what caused inflation, and we’re going to bring it down because we’re going to go drill, baby, drill."
Fox Business’ Megan Henney and Reuters contributed to this report.
