By Heather Richards
The Biden administration’s “high level blueprint” for revamping the federal oil and gas program, published over the Thanksgiving holiday, is either a bombshell or a dud depending on who’s talking.
On the one hand, it lays out an overhaul of the the federal oil program that has been largely unchanged for decades. It’s won accolades from many environmental groups that have fought for these changes for years and elicited groans from industry allies who say the proposals would hamper production at a time when this country should actually be encouraging development.
But some climate activists countered the Interior Department’s long-awaited report merely embraces incremental reforms that fail to sufficiently address the federal oil program’s contributions to climate change, and certainly do not uphold President Biden’s campaign pledge to end new leasing on public lands and waters.
If Interior Secretary Deb Haaland implements the report’s recommendations, oil drillers on public land could face a dramatic increase in royalty rates for the first time in 100 years. They also may need to secure insurance to cover their cleanup costs, a multibillion-dollar hole in current bonding that would ensure wells are plugged and lands restored after drilling (Greenwire, Nov. 26).
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Increased royalties may be the marquee item of this report, but they are closely followed by Interior’s argument for bonding updates.
When oil and gas developers drill on federal leases, they must set aside cash, or otherwise secure through insurance bonds, to cover the cost of cleanup. The idea is if the company goes under or the assets change hands, taxpayers won’t be on the hook.
But the report notes that bonding rates are now 50 years old and argues that recent bankruptcies show the increasing risk of cleanup costs falling to taxpayers.
Indeed, the reconciliation package pushed by the Biden administration and congressional Democrats, the “Build Back Better Act,” would set aside $4 billion to cover already orphaned oil and gas infrastructure across the country, which includes wells on both public and private lands.
Speaking to a recent panel, Interior Deputy Secretary Tommy Beaudreau said reforms to address low bonding in the federal oil program would mean that kind of cost doesn’t have to be doled out again.