On the Friday after Thanksgiving — a day the federal government notoriously reserves for dropping politically inexpedient information — activists were blindsided by a long-anticipated reportThe U.S. Department of the Interior. The document was a review of the agency’s oil and gas leasing program, which manages fossil fuel extraction on federal public lands and waters.
Climate activists were optimistic that the Biden Administration would recommend a complete ban on federal oil- and gas leasing. Although the report recommends a major overhaul of the leasing system many environmentalists think it is weak on climate action. They believe that Interior’s recommendations signaled an unwillingness to take bold steps to address the urgency of the climate crisis.
“We’re sympathetic to the political gantlet the Biden administration must run,” said Erik Schlenker-Goodrich, executive director of the Western Environmental Law Center, in a statement. “But it had a choice to run it with power, speed and agility. Instead, it’s running that gantlet weak, slow, and tentative.”
Jeremy Nichols of WildEarth Guardians, director for the climate and environment program, said that the report didn’t call for a halt in new oil or gas leasing. “The fact that it applies to new leases signals new oil and gas development,” he said. “The department seems to be signaling that it wants to do everything it can to keep the oil and gas industry going. That is not a climate solution.”
However, Western states would benefit from a change in the royalty rate. New Mexico and Wyoming have over halfLeases and well together are part of the program over a billion dollars a year from combined royalties — the revenue shares paid to state governments by oil and gas companies. This money is used to fund schools, roads, and other public goods. Royalties are highly volatile and can change at the will of any party. boom-and-bust industry. Onshore oil and gas companies currently pay a 12.5% royalty rate — a figure set more than a century ago. The report notes that some oil-producing states and private landowners demand higher rates, as high as 25% in certain cases.
The Interior Department also recommends addressing the root financial cause of so-called “orphaned wells” on public land. Oil and gas companies often liquidate their assets when they go bankrupt. This can lead to wells being abandoned. The cost of cleanup is borne by taxpayers when this happens. According to a report by the Western Wildlife Federation, in 2018 there were 8,050 inactive wells “orphaned or at risk of being orphaned on federal lands” across five Western states.
To solve this problem, the Interior Department argued that “bonding levels” — the amount of money companies pay up front to cover future cleanups — need to be raised to pay for these wells before they are abandoned. The current leasing system allows companies the ability to purchase what are called blanket bonds. A single bond can cover a large number wells. A company can buy a $25,000 bond to cover all its wells in one state or a $150,000 bond for all its wells on public lands. This model has a problem: the average cleanup cost of a single well can range from $20,000 to $145,000 according to a Government Accountability Office report.
“There’s an unwillingness for them to own the issue and play a role in confronting the climate crisis.”
Nichols stated that conservationists are happy to recommend reforms. However, Westerners already pay increasing amounts for climate inaction, as wildfires, floods, and drought worsen. “It seems like this administration is cowering,” he said. “There’s an unwillingness for them to own the issue and play a role in confronting the climate crisis.”