DOI Pushes for Higher Fees for Offshore, Onshore Oil and Gas Companies
A new Department of the Interior (DOI) report on oil and gas leasing in federal lands and waters advises the DOI’s Bureau of Land Management to raise royalties, rental rates, and other fees on oil and gas companies, but hasn’t moved to halt new leasing entirely.
During his 2020 presidential run, President Joe Biden’s campaign website said that his climate plan would include “banning new oil and gas permitting on public lands and waters.”
The DOI report (pdf), issued in response to Biden’s Jan. 27 executive order, was quietly published on Black Friday after months of delays. Interior Secretary Deb Haaland said in March that the report would be released in “early summer.”
Oil prices and gasoline prices have become a hot-button issue, with many blaming the Biden administration’s freeze on oil and gas leasing, the shutdown of the Keystone XL pipeline, and other policies for helping to drive up costs in recent months.
“So, begging OPEC+ for more supply, raiding our strategic reserve to try to lower prices at the pump, and now increasing leasing fees on U.S. producers. Yep, makes perfect sense—if you’re a Democrat,” wrote Dan K. Eberhart, CEO of Canary, a Denver-based drilling company, on Twitter in response to the DOI report.
In the days and weeks since the COP26 summit ended, the Biden administration has held the largest U.S. offshore drilling auction and released 50 million barrels of crude oil from the United States’ emergency oil stockpile, the Strategic Petroleum Reserve (SPR).
The offshore auction came months after U.S. District Judge Terry Doughty ruled against the Biden administration’s pause on new oil and gas leases on public lands and waters, finding that such auctions are mandatory under federal law.
Specifically, Doughty determined that the DOI is required to hold quarterly lease sales under both the Mineral Leasing Act and the Outer Continental Shelf Lands Act.
While the Biden administration said its 50 million gallon SPR release was motivated by a desire to “lower prices,” some analysts have said the release won’t significantly impact oil prices.
Oil prices dropped following the late November emergence of the COVID-19 variant B.1.1.529, which the World Health Organization dubbed “Omicron” on Nov. 26.
The DOI report claimed the U.S. oil and gas leasing program “fails to provide a fair return to taxpayers, even before factoring in the resulting climate-related costs that must be borne by taxpayers.”
In addition to recommending higher onshore and offshore drilling fees, new screening procedures for bidders, and a “Fitness to Operate” standard for prospective offshore operators, the report states that the DOI’s Bureau of Ocean Energy Management and Bureau of Safety and Environmental Enforcement would “study the most appropriate method” to develop and apply pricing for methane, carbon dioxide, and nitrous oxide for offshore operators.
The report has already been met with criticism from the oil and gas industry.
Frank Macchiarola of the American Petroleum Institute, a key oil and gas trade association, said in a statement: “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. Days after a public speech in which the White House said the president ‘is using every tool available to him to work to lower prices and address the lack of supply,’ his Interior Department proposed to increase costs on American energy development with no clear roadmap for the future.”
The report prompted a mixed response from the Sierra Club, which had endorsed Biden during his 2020 presidential campaign.
“We applaud the Biden administration for recognizing the serious flaws in the current oil and gas leasing program and making long-overdue reforms. But to truly tackle the climate crisis, we need to phase out all new leasing for fossil fuels on public lands and offshore—activities that contribute to nearly a quarter of this country’s greenhouse gas emissions,” said Sierra Club Lands Protection Program Director Athan Manuel.
Colin Rees, U.S. program manager for Oil Change International, went further in a statement from that group.
“President Biden promised to end the leasing program entirely due to its deadly threat to the climate. Interior’s recommendations fall far short of that goal and ring particularly hollow days after the largest lease sale in U.S. history,” he said.
“Secretary Haaland and President Biden must end all federal leasing and permits for oil and gas extraction. Anything less is unacceptable and a damning failure of their climate promises and responsibility to future generations.”
Rep. Bruce Westerman (R-Ark.), the ranking Republican member on the House Natural Resources Committee, also denounced the report.
“After keeping the entire energy industry in limbo for months, DOI’s report shows they have only just begun their war on safe, reliable, domestic energy,” Westerman said in a statement.
“They will bog small energy companies down in years of regulatory gridlock, place millions of acres of resources-rich land under lock and key, ignore local input, and sell out to overseas suppliers. Ultimately, the American consumer will pay the price.”
Westerman’s remarks were echoed by Sen. John Barrasso (R-Wyo.), ranking GOP member of the Senate Committee on Energy and Natural Resources.
“Shutting down energy production on federal lands will not fix climate change. It will just push production off federal lands, including to countries that have lower environmental standards than the United States,” Barrasso said in a statement.
House Republican Whip Steve Scalise (R-La.) wrote on Twitter: “Now we know why the Biden Administration quietly dropped their ‘Bleak Friday’ Oil and Gas Leasing Report the day after Thanksgiving. It spells higher gas prices for hardworking families—while Biden bows to OPEC instead of producing cleaner, lower-cost American energy right here.”
