Making oil and gas drilling a little harder: ED Report July 2023

• July 31, 2023
• CalWild

By Chris Morrill, Executive Director

Earlier this month, the Bureau of Land Management (BLM) proposed new oil and gas leasing rules that codified reforms passed as part of the Inflation Reduction Act. The new rules attempt to right-size many of the significant financial advantages of drilling on public lands that oil and gas companies have exploited for decades.

A drilling rig on BLM land in Utah

After losing money for years, these changes are designed to give taxpayers a better deal when leasing public lands. Here is a summary of some of the proposed changes:

1. The new rules would increase the royalty rates (money paid to the government from oil company profits) from 12.5% to 16.67% for 10 years. The royalty rate was well below what is paid for oil obtained from federal waters (18.75%) and well below what many states charge (e.g.- Texas charges 25%).
2. The rental rates that companies pay to BLM for use of the land will increase from $1.5/acre to $3/acre for the next two years, then increase to $5/acre from years three to eight, and then rise to $15/acre after that.
3. The rules would also significantly increase the bond amounts required to operate on public lands. These bonds are designed to better protect taxpayers from the financial burden of cleaning up abandoned wells. They are also intended to reduce the serious environmental and health risks associated with these wells.
4. Competitive leasing preferences would be codified for existing and high potential lands. These leasing preferences would also attempt to avoid high conflict areas for wildlife, cultural sites, and other important public lands values.
5. Applications for permits to drill would have three years to be utilized to ensure that leases are used, otherwise other activities would be allowed to be pursued. This would avoid leases that are simply held on to endlessly without use (in part because of the extremely low rental costs). A report by the Center for Western Priorities found that BLM lands with wilderness-quality characteristics were three times less likely to be managed for those wilderness characteristics when that land overlapped with oil and gas leases, regardless if the area was producing oil or not.

These rules are not perfect and for many of us will not move us away fast enough from fossil fuel extraction on public lands. However, this is a very important step in reforming the large and disproportionate subsidies oil and gas companies have received for decades. This modernization finally begins to consider the many other values that public lands bring to all of us. The new Public Lands Rule is another initiative showing that conservation and non-motorized recreation have for too long been outside the possible considerations of our public lands managers.

Your generous help makes a profound difference in the outcome of these processes. In the coming weeks, we will share an action alert outlining how you can support the new rules. Thanks for  your support for conservation on our public lands.

Other sources and more background:

1. Taxpayers for Common Sense
   1. Statement- https://www.taxpayer.net/energy-natural-resources/tcs-statement-on-interior-departments-proposed-rule-on-oil-and-gas-leasing/
2. Center for Western Priorities
   1. Podcast on new oil and gas proposed rules- https://westernpriorities.org/2023/07/new-oil-and-gas-rule-just-dropped-whats-in-it/
   2. Deeper dive on the changes- https://westernpriorities.org/2023/07/taking-stock-of-the-biden-administrations-oil-and-gas-reforms/
   3. Abandoned wells problem- https://westernpriorities.org/2022/02/new-analysis-even-undrilled-oil-leases-put-pristine-public-lands-at-risk-across-the-west/

Please let me know your thoughts, comments, and questions by emailing me at cmorrill@calwild.org.