Interior calls for hiking rates on oil and gas companies to drill on federal lands
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The Department of the Interior issued a long-awaited report on Friday ordered by President Biden when he first took office, when he paused leases to oil and gas contracts on federal lands citing concerns about climate change.
The report called for raising royalty rates for such leases on public lands, but stopped short of recommending an end to them completely as environmental activists have demanded.
A press release from the Interior said the report found "significant shortcomings in oil and gas leasing program," and called for "significant reforms that should be made to ensure the programs provide a fair return to taxpayers, discourage speculation, hold operators responsible for remediation, and more fully include communities and Tribal, state, and local governments in decision-making."
Rep. Deb Haaland, D-N.M., speaks during a Senate Committee on Energy and Natural Resources hearing on her nomination to be Interior Secretary, Tuesday, Feb. 23, 2021 on Capitol Hill in Washington. (Graeme Jennings/Pool via AP) (AP / AP Newsroom)
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"Our nation faces a profound climate crisis that is impacting every American," Interior Secretary Deb Haaland said in a statement. "The Interior Department has an obligation to responsibly manage our public lands and waters – providing a fair return to the taxpayer and mitigating worsening climate impacts – while staying steadfast in the pursuit of environmental justice."
Haaland added, "This review outlines significant deficiencies in the federal oil and gas programs, and identifies important and urgent fiscal and programmatic reforms that will benefit the American people."
The report itself states that the royalty rates on federal oil and gas leases "have not been raised for 100 years," noting that "states with leading oil and gas production apply royalty rates on State lands that are significantly higher than those assessed on Federal lands" and adding that the royalty rate charged by Texas, for instance, "can be double the federal rate."
View of the pumpjack in the oil well of the oil field. The arrangement is commonly used for onshore wells producing little oil. Pumpjacks are common in oil-rich areas. (AP/iStock / AP Images)
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A chart included showed that the royalty rates for federal oil and gas leases are typically around 12.5%, while Texas' rates are between 20-25%. By comparison, California, Montana, North Dakota, Utah and Wyoming rates are at 16.67%, while Oklahoma's rate is at 18.75% and Colorado's is at 20%, according to the report.
The Interior also wants to see a hike in bonding rates for companies engaged in the contracts, arguing that the levels have not been raised for 50 years.
But the proposal to raise royalty rates on oil and gas companies comes as Biden already faces enormous political heat over energy prices in the U.S., which have spiked more than 50% over the past year and had a large part in driving soaring inflation in the nation that is hitting Americans in their pocketbooks – and hitting Biden's poll numbers.
Earlier this week, Biden ordered the release of 50 million barrels of oil from the strategic petroleum reserve in an attempt to stop the bleeding on soaring gas prices, a move criticized by Republicans who point out that the U.S. became energy independent under former President Trump – and argue that Biden's policies such as shutting down pipelines and halting federal leases have fueled the shortages.
Gas prices have soared by 50% nationwide over the past year (Getty Images)
The Wall Street Journal reported that following the Interior Department's report, "The American Petroleum Institute, the industry’s top lobbying group, said the Biden administration is sending mixed signals by both calling for initiatives to lower gas prices and releasing a report that would increase costs on American energy development."
Meanwhile, climate change activists are furious over the report, saying the recommendations don't go far enough and slamming Biden for not keeping a campaign promise to end new oil and gas leases on federal lands entirely.
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"As expected, Interior's oil and gas report is a complete climate failure," tweeted Taylor McKinnon of environmental group Center for Biological Diversity. "Its cowardly reform ideas presume more oil and gas leases that our climate can't afford. It abandons Biden's promise to end new fossil fuel leasing and permitting."
Prior to the report being released on Friday, McKinnon tweeted, "A Friday-after-Thanksgiving news dump would signal skulking shame. Get ready for climate failure in the Interior Department's five-month-late report on the oil and gas program review."