On April 12, the U.S. Department of the Interior finalized a new public land lease rule, the first time in more than 100 years that the U.S. has increased the drilling royalty rate and the first time in more than 60 years that the minimum deposit for the landfill of abandoned wells and their associated cleanup costs has been raised.
On April 12, the U.S. Department of the Interior finalized a new public land lease rule aimed at increasing the costs that oil and gas companies need to bear to carry out oil and gas exploration activities on public land, including drilling royalty rates, minimum deposits for clearing abandoned wells, land lease fees, and minimum auction prices for leaseholds. This is the first time in more than 100 years that the U.S. has increased the drilling royalty rate, and the first time in more than 60 years that the minimum deposit has been raised for the cost of landfilling abandoned wells and their associated cleanup. US public opinion believes that this shows the sense of urgency of the election game from the side.
Extraction of oil and gas on federal land has become difficult
On April 12, the Bureau of Land Management, part of the U.S. Department of the Interior, announced that it would raise the royalty rate paid by oil and gas companies to the federal government for drilling for the first time since 1920, as well as the minimum deposit for landfills of abandoned wells and their associated clean-up costs, the first increase since 1960.
Under the new rules, the drilling royalty rate will be increased from 12.5 percent to 16.67 percent, which has remained unchanged since 1920, and the minimum deposit for the cost of landfilling and clean-up of abandoned oil wells will be increased from $10,000 to $150,000, which has remained unchanged since 1960. This means that the cost of oil and gas companies to conduct oil and gas extraction activities on U.S. public lands will increase further, especially since they will have to pay a high security deposit in advance to ensure that they can cover the cost of cleaning up abandoned wells in the future.
The Associated Press noted that since 2019, deposits for abandoned well landfills and their associated clean-up have been insufficient, leading the U.S. federal government to pass on the costs to taxpayers.
The U.S. Department of the Interior estimates that the cost of plugging a well on federal land is between $20,000 and $140,000. Oil and gas companies evaded clean-up responsibilities through bankruptcies, resulting in at least 15,000 abandoned wells on U.S. federal lands, and in 2021 received $4.7 billion in fiscal funding to clean up the mess, since then the Department of the Interior has paid more than $1 billion to the states.
In addition, the minimum amount that oil and gas companies can bid in oil and gas auctions will be increased from $2/acre to $10/acre, and the 10-year rent will increase to $3/acre two years before expiration, and will gradually increase to $15/acre until the end of the lease term. At the same time, the new regulations also restrict drilling activities in sensitive wildlife and cultural areas.
"This is the most significant reform of U.S. federal land oil and gas exploration in many years, designed to reduce speculation and increase public returns, while protecting taxpayers from incurring excessive environmental clean-up costs," said U.S. Secretary of the Interior Deb Harlan. ”
"Public lands are owned by all Americans, and we are committed to managing them in a balanced and responsible manner that protects taxpayers and provides a foundation for a better energy transition," said U.S. Land Management Commissioner Tracy Stonemanning. ”
Threatens the security of local energy supply
The introduction of new regulations has raised the cost of extracting oil and gas on U.S. public lands, and has once again provoked a backlash and criticism from the oil and gas industry.
Republican leader John Barasso of the U.S. Senate Energy and Natural Resources Committee has slammed the U.S. federal government for doing everything it can to make oil and gas production on federal lands economically unviable. "Less activity (for oil and gas extraction) means fewer jobs and less economics. ”
The U.S. oil industry has generally said it will resort to law, stressing that these costs will force oil companies off U.S. federal lands. The American Petroleum Institute has raised objections to the new rule during a public comment period, and has published data on the economic contribution of oil development on U.S. federal lands, citing about 170,000 jobs in five states.
The American Petroleum Institute said it will carefully review the new rules to ensure that the U.S. federal government meets its responsibilities to taxpayers and promotes fair and consistent access to federal resources.
"As energy demand continues to grow, oil and gas development on federal lands will be fundamental to maintaining energy security, powering the economy, and supporting local efforts, and the increased cost of oil and gas extraction on federal lands will increase the U.S. dependence on imported energy. Holly Hopkins, vice president of upstream policy at the American Petroleum Institute, said overly burdensome land management regulations would put critical energy supplies at risk.
The symbolism is greater than the substance
However, the Center for Biological Diversity, a nonprofit environmental group, said the new rules would only affect a small portion of oil and gas production. "While these regulations are helpful, they don't make much of a splash in terms of restricting oil and gas extraction. Robert Weisman, president of the American advocacy organization Public Citizen, said frankly.
Gladys Delgadillo, a climate activist at the Center for Biodiversity, said: "We can go further [in terms of limiting fossil fuels]. Updating oil and gas rules on federal lands without setting a phase-out timeline is a denial of climate change and drilling on federal lands should be halted altogether. ”
The industry generally believes that whether it is raising the cost of oil and gas extraction on public land, tightening drilling activities in the Arctic, or indefinitely suspending the approval of LNG export projects, it is actually a bipartisan game in the United States over the November election.
It is worth mentioning that the new rules of the US Department of the Interior only apply to US federal public lands, which produce less than 10% of the total oil and gas production in the United States, so the symbolism of the new regulations is significantly greater than the substance. U.S. public opinion believes that the U.S. federal government's move is tantamount to helping Biden win more support and pave the way for the November election.
The Financial Times pointed out that US President Joe Biden has taken continuous actions against the oil and gas industry this year in order to get more "green votes" before the election. Biden's campaign promise was to accelerate the green transition, but crude oil and natural gas production has continued to grow during his tenure, with the United States leading the world in oil and gas production last year.
It is understood that the energy sector has always been the main front of the bipartisan game in the United States, the Democratic Party is trying to get more "green votes" by opening a knife to the oil and gas industry, and the Republican Party has been encouraging vigorous oil and gas exploration, calling for the oil and gas industry to "loosen the rules".
Original title: The United States raised drilling royalty rates for the first time in a century
Text丨Reporter Wang Lin