Federal officials weigh the climate crisis and the pressure to lower gasoline prices as they consider federal efforts to combat it. The interior department is now moving forward with the first ever onshore sales of public oil-and natural gas drilling leases. Joe Biden.
The move also calls to a sharp increase of royalty rates for businesses, ostensibly in order to limit global emissions that are driving climate crisis. Economists however say the effect will not be significant.
The new lease royalty rate will rise to 18.75% from 12.5%. That’s a 50% jump and marks the first increase to royalties for the federal government since they were imposed in the 1920s.
Biden suspended new leasing one week after assuming office in January 2021. A federal judge in Louisiana ordered the sales to resume, saying interior officials had offered no “rational explanation” for canceling them.
Although the government held an offshore auction of leases in the Gulf of Mexico in November 2005, a court later blocked the sale before the leases had been issued.
Friday’s announcement comes as Biden faces pressure to expand US crude production after the pandemic and war in Ukraine have caused a surge in fuel pricesOther problems have also affected the world economy.
The Democratic president was elected last month Announced plans to release 1m barrels daily from the US strategic oil reserves to, as he put it, “ease the pain families are feeling right now” at the country’s fuel pumps because of Russian president Vladimir Putin’s decision to invade Ukraine.
Biden faces calls from his own party to cut emissions from fossil fuels, which are driving the climate crisis.
In a notice to be published on Monday, officials announced that leases covering 225 sq miles (580 kilometers) of federal land primarily in western US will be up for sale. These parcels are 30% less than the land that officials proposed for sale in November, and 80% less then what was originally proposed by the industry.
The sales notices will be applicable to leasing decisions in nine states: Wyoming (Colorado, Utah, New Mexico), Montana, Alabama and Nevada as well as North Dakota, North Dakota, Oklahoma, North Dakota, North Dakota, North Dakota, North Dakota, North Dakota, Nevada, Nevada, Nevada, Montana, Alabama and Nevada.
Interior department officials declined to specify which states would have parcels for sale or to give a breakdown of the amount of land by state, saying that information would be included in Monday’s sales notices. They stated that the smaller area offered is due to the emphasis on leasing near existing oil and natural gas development, including pipelines.
Companies that had proposed leasing hundreds of parcels on public land were previously withdrawn from the upcoming lease sale due to concerns about wildlife being damaged by drilling rigs.
Officials at the time stated that the cost of burning fuel from the remaining leases could be billions of dollar in climate crisis costs. Fosil fuels derived from public lands account roughly 20% of US energy-related greenhouse gas emissions. Climate activists want to stop leasing.
RepublicansThey want more drilling. They claim it would increase US energy independence as well as lower the price of crude oil. Oil companies have been cautious about expanding drilling because of uncertainty about the future price of crude oil.
Friday’s announcement comes after interior officials had raised the prospect of higher royalty rates and less land available for drilling in a leasing reform report issued last year.
“For too long, the federal oil and gas leasing programs have prioritized the wants of extractive industries,” said Secretary Deb Haaland. “Today, we begin to reset how and what we consider to be the highest and best use of Americans’ resources.”
However, both sides of the political spectrum condemned the move: Environmentalists criticized the decision to hold the long-delayed sale, while representatives from the oil industry said that higher royalty rates would discourage drilling.
Nicole Ghio with the environmental group Friends of the Earth said Biden was “auctioning off our public lands to big oil”, putting oil industry profits ahead of future generations that will have to deal with the worsening consequences of the climate crisis.
Meanwhile, American Petroleum Institute vice-president Frank Macchiarola said officials removed some of the most significant parcels that companies wanted to drill while adding “new barriers” that would discourage companies from investing in drilling on public lands.
Over the past decade, more than $83bn was earned by companies through lease sales and royalties on extracted oil and natural gas. Half of the proceeds from onshore drilling go to the state where it took place.
According to federal officials, most states and private landowners require companies pay royalty rates greater than 12.5%. Some states charge 20% or more.
18.75% is the royalty rate on oil from federal reserves in deep water in the Gulf of Mexico. The November auction, which was later cancelled, saw energy companies Shell, BP Chevron, Chevron, and ExxonMobil offer $192m each for offshore drilling rights within the Gulf.
New leases could continue to produce crude oil well beyond 2030, when Biden set a goal of reducing greenhouse gas emissions by at minimum 50% compared to 2005 levels. Scientists believe the world must be on track to achieve this goal in the next decade to avoid a catastrophic climate crisis.
Economists believe that a higher royalty rate would have little effect on global emissions because any reductions in oil or gas from federal lands would be largely offset with fuel from other sources.