Oil and gas extraction regulations on federal lands have remained unchanged for many years. It is expected to have a fee hike for drilling.
Since more than a century ago, oil and gas corporations have paid the federal government 12.5 percent in royalties for drilling on public lands, which is much less than what several Western states charge.
Joe Biden’s Push for Energy Development on Federal Lands
Companies are also required to post bonds, which are financial commitments that ensure taxpayers won’t be left footing the bill for environmental cleanup in the event of a driller’s bankruptcy.
But the bond amounts were fixed in 1960 at $10,000 per lease, which is a pittance compared to the actual expense of sealing and cleaning up oil wells that companies abandon.
Environmentalists and good governance organizations have long maintained that these regulations have served as a subsidy for fossil fuels, taking advantage of taxpayers and promoting oil and gas development at a time when global warming is accelerating dangerously.
Now, the Biden administration is working to balance things out. The new proposed regulation would raise the minimum lease bid from $2 per acre to $10 per acre, raise the necessary bond from $10,000 to $150,000 per lease, and increase the minimum royalty rate from 16.5 to 16.7 percent.
Additionally, the rule prioritizes leasing in regions with existing oil and gas infrastructure, freeing up more land for the development of renewable energy sources, and it strengthens protections for cultural and wildlife ecosystems.
Read more: Fed Unveils Rapid Payments System For Instant Money Transfer
Challenges in Covering Cleanup Expenses
Bonds gathered by the federal government are intended to assist in defraying cleanup expenses in such circumstances.
However, the BLM has required $10,000 for each lease and $25,000 for multiple leases in a state since at least 1960.
Even though the cost of plugging a single well on federal lands might range between $20,000 and $140,000, the government is frequently left with just a few thousand dollars or less due to the fact that each lease can contain numerous wells.
Read more: Tesla’s Stock Slumps 10% On Margin Fears, Elon Musk’s Q3 Warning