Monthly eNewsletter from the IADC

Washington, D.C., Updates for August 2023

IADC Advocacy - Image - GovernmentAndIndustryAffairs - Washington DC - US Congress

U.S. Department of the Interior offers new rules for federal oil and gas leases

Recently, the U.S. Department of the Interior proposed a series of changes to the federal oil and gas leasing program that would raise the bonding requirements and royalty rates that companies pay to develop energy on public lands.

The department stated that the proposed changes to the Bureau of Land Management’s (BLM) program are necessary to modernize these regulations, many of which have remained untouched for decades.

The rule would codify provisions included in last year’s climate and tax reconciliation law (Public Law 117-169) and the 2021 infrastructure law (Public Law 117-58)

The reconciliation law increased royalty rates for drilling on public lands from 12.5% to 16.67%. The rule specifies that any leases issued after that law’s enactment on 16 August 2022 through August 2032 will be subject to the higher rate.  After August 2032, the 16.67% rate would become the minimum.

The rule also proposed increasing the minimum lease bond amount from $10,000 to $150,000. The department claims the bonding amount no longer provides incentive for companies to meet the reclamation obligations, nor does it cover the potential costs to remediate a site if a company fails to meet its obligations.

The rule would also codify a provision of the reconciliation law raising minimum bids from $2 per acre to $10 per acre, as well as a fee of $5 per acre for expressions of interest. It would include a rental rate of $3 per acre for the first two years after the reconciliation law’s enactment, which would increase over time.

As expected in Washington, D.C., differing views came down political lines, and environmental groups generally praised the rules, while the oil and gas industry denounced the proposal as draconian and likely to reduce oil and gas production on federal lands.

As directed by the Department of the Interior, the BLM will offer five public meetings and accept public comments for 60 days. Comments on this proposed rule to the BLM must be sent on or before 22 September 2023. Public involvement through this rule-making process, especially from those in the oil and gas industry, is crucial to ensure that all views are being heard and that BLM is making appropriate land management decisions.