Biden Administration Implements Rules Increasing Oil Drilling Expenses

President Joe Biden’s administration on Friday finalized a range of regulations designed to boost the cost of oil and gas drilling on public lands.

The new rules follow years of criticism from green and taxpayer groups of federal oil and gas development. Many of the changes formalize provisions in Biden’s landmark climate change law, the 2022 Inflation Reduction Act (IRA).

Under the new policy, oil and gas companies will pay higher bonding rates to cover the cost of plugging abandoned oil and gas wells as well as increased lease rents, minimum auction bids, and royalty rates for the fuels they extract. The rules also limit drilling in sensitive wildlife and cultural areas.

“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 in a statement.

About 10 percent of the nation’s oil and gas comes from drilling on federally owned land. An oil and gas industry trade group warned that higher costs to extract fuels from federal lands could boost U.S. reliance on foreign supplies.

“Overly burdensome land management regulations will put this critical energy supply at risk,” American Petroleum Institute vice president of upstream policy Holly Hopkins said in a statement.

Biden vowed during his 2020 election campaign to end federal oil and gas leasing as part of his agenda to combat climate change. But the IRA effectively guaranteed continued drilling rights auctions on federal lands for at least another decade as a concession to the powerful fossil fuel lobby.

Drillers are required to pay upfront bonds to cover future cleanups if they fail, and a 2019 government analysis found bonding levels were inadequate.

Minimum lease bonds will soar to $150,000 under the new rules from $10,000—a level unchanged since 1960.

Royalty rates will rise to 16.67 percent from 12.5 percent, and the minimum amount companies can bid at oil and gas auctions will increase to $10 an acre from $2. The rental rate for a 10-year lease will double to $3 an acre for the first two years, eventually rising to $15 per acre in the final years. The fees can be adjusted for inflation after 10 years.