This story was first published high altitude news Reprinted here as part of. climate desk collaboration.
On April 12, the Department of the Interior announced new rules imposing stricter financial requirements on oil and gas companies operating on federal public lands. This is the first such change since 1960.
The reforms include a sharp increase in the amount drilling companies must submit to ensure wells are cleaned up. It would also increase the royalty rate that businesses pay on minerals they mine on public land, which has remained unchanged for more than 100 years.
Interior Secretary Deb Haaland said in a statement that the changes „will reduce wasteful speculation, increase benefits to the public, and protect taxpayers from being forced to pay for environmental cleanup.“
The final version of the rule, released in draft form last summer, joins a series of moves by the Biden administration on climate change and conservation in recent weeks. methane Emission standards for oil wells and renewable energy on federal lands policy It aims to encourage the development of wind and solar power. Environmental groups praised the rule as long overdue.
“These new regulations are common sense reforms that the federal oil and gas leasing program has needed for decades,” Sierra Club Land Conservation Program Director Ahsan Manuel said in a statement.
Higher bond obligations mean the government has substantially more money available to clean up abandoned oil and gas wells. For drilling, energy companies provide financing. Most of that is done in the form of bonds purchased with third-party surety companies to ensure the cleanup takes place.
These bonds will be held until the company plugs the well. If companies carry out the reclamation work themselves, the bonds will be returned to them. If a company goes bankrupt or otherwise abandons a well, the government can use the bond money to pay for plugging and environmental cleanup.
The level of bonding needs to be high enough to encourage purification rather than abandonment, and the Home Office bond has remained unchanged for over 60 years. 2019 report A study by the Government Accountability Office found that between 84 percent and 99 percent of bonds for wells on public lands do not cover the full cost of cleanup. The new rules increase the minimum deposit for a single public oil and gas lease, which often includes multiple wells, from $10,000 to $150,000. For companies operating multiple leases within the same state, the bond increases from $25,000 to $500,000.
Despite these increases, the new bond levels are unlikely to fully cover the cost of cleaning up the more than 90,000 unplugged wells overseen by the Bureau of Land Management. Same 2019 GAO report They found that the cost to plug an orphaned well on public land ranges from $20,000 to up to $145,000 per well, with a median cost of $70,000 to plug a well and clean up the drilling site. I discovered it was $1,000.
Insufficient coupling often results in wells not only remaining idle without production, but also unplugged. Studies show that unused wells are more likely to become orphaned, and the financial burden of cleanup will fall on public regulators and ultimately taxpayers. The Department of the Interior estimates that there are 3.5 million abandoned oil and gas wells in the United States, which are substantial sources of methane, a powerful greenhouse gas.
The new rules require businesses operating on public lands to comply with new financial standards for the next three years, with updates every 10 years to keep pace with inflation.
The new rules would also increase the royalty rates companies pay on profits from minerals mined on public lands, a windfall for Western states such as Alaska, California, Colorado, New Mexico and Wyoming. becomes. The previous royalty rate of 12.5% was set in 1920. In 2022, the Inflation Control Act mandates a new royalty rate of 16.67% and increases the minimum bid price for oil and gas leases from $2 to $10 per acre. .
About half of this new revenue will go to the states where the drilling will take place to fund public services. It is already a major source of income for oil and gas producing states. New Mexico sometimes receives more than $1 billion annually from BLM oil and gas operations, thanks to lease sales in the Permian Basin. Still, Taxpayers for Common Sense, a nonpartisan fiscal think tank, estimates that the government lost more than $12 billion in revenue between 2010 and 2019 because royalty rates were too low.
The oil and gas industry was not satisfied with the final version of the rule. Kathleen Sgamma, president of the Western Energy Alliance, an oil and gas industry group, said in a statement that the changes would force small operators off public lands, and the group could file a lawsuit. he suggested.
„This is another rule from the Biden administration that would restrict the federal government's supply of oil and natural gas,“ he said in a statement, referring to President Biden's pledge during the 2020 presidential campaign to ban drilling on public lands. „The purpose is to fulfill the president's promise not to do so.“ „Western Energy Alliance has no choice but to litigate this rule.“
While most environmentalists praised the rule, some criticized the administration for failing to fulfill this same campaign promise, arguing that increasing the economic benefits of oil and gas drilling is not the same as banning the practice. There were too.
“Reading this rule is like finding an old floppy disk,” Gladys Delgadillo, a climate change activist at the Center for Biological Diversity, said in a statement. “It’s not 2024. Updating oil and gas rules for federal lands without setting a phase-out deadline is climate change denial, pure and simple.”