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BLM announces significant cost increases to onshore oil and gas leasing program

An oil well in front of golden grassy bluffs.
BLM Wyoming
Flickr via CC BY 2.0

The Bureau of Land Management (BLM) is significantly increasing the costs oil and gas companies will pay to drill on federal land for the first time in decades.

The agency says the increases aim to boost returns to the public, curb speculation and cover potential cleanup for wells that are no longer producing.

The amount companies pay for cleanup insurance, or what’s called minimum reclamation bonds, will rise 15 to 20 times over the previous rates set in 1960. The BLM says the change will ensure companies – and not taxpayers – pay to reclaim idled wells.

Royalty rates, minimum bids and base rental rates are also increasing.

The new rule published Friday also focuses leasing in areas with existing infrastructure and high oil and gas potential – and away from areas with sensitive wildlife habitat, cultural sites and popular recreation spots.

The BLM finalized the rule proposed last year after receiving more than 130,000 public comments.

A sentiment analysis by the Center for Western Priorities found overwhelming support for the changes.

“The reforms in the final Oil and Gas Rule are common-sense and long overdue,” said Center for Western Priorities Policy Director Rachael Hamby. “Updating royalty, rental, and bonding rates—and ensuring those rates don’t fall out of date again in the future—ensures a fair return for taxpayers and is the fiscally responsible thing to do. Discouraging companies from locking up lands they are not actually interested in drilling will help bring balance to the way the BLM manages our public lands by putting other land uses on a more equal footing with oil and gas.”

Meanwhile, energy advocates call the changes excessive and say legal challenges are likely.

“The BLM rule will drive small producers off public lands,” Western Energy Alliance President Kathleen Sgamma said in a statement. “The bonding amounts are excessive when there are just 37 orphan wells out of more than 90,000 wells on federal lands. Increasing bonding amounts 20-fold in order to take care of a problem on just .004 percent of wells is way out of proportion. This is another rule by the Biden Administration meant to deliver on the president's promise of no federal oil and natural gas. Western Energy Alliance has no other choice but to litigate this rule.”

Wyoming Gov. Mark Gordon also harshly criticized the changes, saying it will cost Wyoming’s oil and gas industry dearly.

“America surely needs more energy, including from renewable sources,” Gordon said in a statement. “What our country does not need are policies that greatly reduce the return to our nation’s taxpayers while simultaneously increasing the impacts and burdens on states and communities. We don’t need policies that increase the costs to consumers while also reducing reliability, or rules that sharpen the threat of industrializing our open spaces and crucial wildlife habitat without recognizing the importance of balance in our energy portfolio.”

The rule caps the Biden administration’s efforts to reform leasing on public lands. Biden in 2021 paused sales for onshore oil and gas leases, a move later reversed by a federal judge. Congress has already passed several aspects of the BLM’s new rule as part of the Inflation Reduction Act and Bipartisan Infrastructure Law.

Nicky has reported and edited for public radio stations in Montana and produced episodes for NPR's The Indicator podcast and Apple News In Conversation. Her award-winning series, SubSurface, dug into the economic, environmental and social impacts of a potential invasion of freshwater mussels in Montana's waterbodies. She traded New Hampshire's relatively short but rugged White Mountains for the Rockies over a decade ago. The skiing here is much better.
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