Home Ministry report on drilling is mostly silent on climate change
WASHINGTON – The Home Office on Friday recommended that the federal government increase the fees oil and gas companies pay to drill on public lands – the first increase in these rent and royalty rates since 1920.
The long-awaited report recommended an overhaul of the rents and royalties charged for both onshore and offshore drilling, noting an estimate that the government has lost as much as $ 12.4 billion in revenue from drilling on the islands. federal lands from 2010 to 2019 because royalty rates have been frozen for a century.
The Home Office said its goal was to “better restore balance and transparency in public management of land and oceans and deliver a fair and equitable return for US taxpayers.”
But the report was almost silent on the climate impacts of the public drilling program. The United States Geological Survey estimates that drilling on public lands and in federal waters is responsible for nearly a quarter of the greenhouse gases generated by the United States that warm the planet.
This silence has angered some environmentalists, who want the federal government to take into account the climate impact of drilling when evaluating the approval of new leases. It would be a first step towards ending new oil and gas drilling on public lands, something President Biden promised during his candidacy.
The report comes as rising gas prices have created political headaches for the Biden administration and prompted Republicans to call for increased domestic gas and oil production. On Tuesday, Biden said he would release 50 million barrels of oil from the country’s emergency stockpile in an attempt to bring down energy prices.
Representatives of the oil and gas industry warned on Friday that the fee hike would spike prices and undermine energy security.
“You know there is something wrong with a policy when it is posted on a Friday and even more so when it is a statutory holiday weekend,” said Kathleen Sgamma, president of the Western Energy Alliance, which represents oil and gas companies.
Frank Macchiarola, senior vice president of the American Petroleum Institute, a trade group, said in a statement that the Biden administration was sending mixed signals by releasing emergency oil reserves and then proposing to increase costs. for industry. This suggests that the administration has “no clear roadmap for the future of federal leasing,” he said.
Meanwhile, environmentalists said they feared the Biden administration would back down on a central climate commitment.
Brett Hartl, director of government affairs at the nonprofit Center for Biological Diversity, called the 18-page report the president’s “massive betrayal” on climate change.
Mr Hartl said environmental groups expected the agency to revise the fossil fuel rental program, taking into account the environmental damage from drilling at the local level as well as its contribution to the global climate crisis. He said the report, which barely mentioned climate change, “is not worth the paper it was written on.”
As a candidate, Biden has pledged to stop issuing new leases for drilling on public lands. “And by the way, no more drilling on federal lands, period. Period, period, period, ”Mr. Biden told New Hampshire voters in February 2020.
This month, he appeared at a global climate summit in Glasgow to urge other world leaders to take bold action to cut emissions from oil, gas and coal. Mr. Biden has pledged to reduce US greenhouse gas emissions by 50 to 52 percent from 2005 levels by the end of this decade. Home Secretary Deb Haaland is a former environmental activist and former congressman who had a campaign website that included this quote from her: “We need to act quickly to address climate change and keep fossil fuels in the dark. ground.
But last week, the Biden administration offered up to 80 million acres in the Gulf of Mexico for drilling leases – the biggest sale since 2017. The administration was legally obligated to hold lease sales afterwards. that Republican attorneys general in 13 states successfully overturned a sales suspension that Mr Biden had attempted to impose. Shell, BP, Chevron and Exxon Mobil have offered $ 192 million for government-offered rights to drill in the area.
The Mineral Leasing Act of 1920 established a system for private companies to lease public land to extract oil and gas from the ground. Companies pay rent until the lease starts producing gas or oil, then pay royalties based on how much fossil fuel is extracted. Royalties have remained unchanged for a century. In 1953, Congress passed the Outer Continental Shelf Lands Act to govern drilling in federal waters. Both laws put in place a system that requires the government to auction leases at regular intervals.
Upon taking office, Mr Biden issued an executive order calling for a temporary ban on new leasing of oil and gas on public land, which was to remain in place while the Home Office produced a full report on the state of federal oil and gas drilling. programs.
Ms Haaland sent the report to the White House in June.
The report’s recommendations to increase drilling costs are largely in line with legislation currently passed by Congress. The massive $ 2.2 trillion climate and social policy bill that was passed by the House of Representatives last week includes provisions that would increase federal royalty rates for oil and gas companies.
Numerous studies by government and tax watch groups have concluded that the federal government underestimates the value of oil and gas resources on public lands and undercharges companies for extracting fuels.
In addition to increasing rents and fees, the report recommended an increase in the current minimum level of obligations. Companies have abandoned thousands of wells on public land, which frequently leak methane and pose other dangers. But the current level of obligations is not enough to cap and clean them, leaving taxpayers to bear the costs.
The Home Office could adopt some of the proposed changes through regulation, but most of the report’s recommendations would require congressional action.
Even at their current levels, royalties are still a significant source of revenue: the federal government has so far raised $ 9.6 billion this year through drilling on public lands and federal waters, up from $ 8 billion. dollars last year.
As a way to increase revenue from the $ 2.2 trillion spending bill, Democrats included provisions in the legislation that would raise royalty rates for onshore oil and gas drilling from 12.5 percent to 18 percent. 75 percent and set offshore rates at “not less than 14 percent”. In auctions of federal oil and gas leases on public lands, the minimum bid would drop from $ 2 an acre to $ 10 an acre. And that would increase the annual rents that businesses have to pay to the federal government to lease the land. According to the Congressional Budget Office, these changes would bring in about $ 2.5 billion in new revenue by the end of the decade.
Conservationists have said they support increasing these fees and charges, but added that the increase would not slow down drilling or climate change.
“This is what has to happen,” said Joel Clement, who resigned from the Home Office in protest under the Trump administration, and is now a senior researcher at Harvard Kennedy School. “But it’s a hit on first base, not a double or a home run. And at this point, we need to have a big twist on public land leasing. It is one of the immediate climate levers that can bring real change. The rental program must take climate emissions into account. This is how we get a lasting moratorium on drilling.
Mr Clement and other climate policy experts said the Home Office should incorporate the potential climate impacts of leasing oil and gas wells into assessments required by the National Environmental Policy Act of 1970, which states that the government must take ecological damage into account when deciding whether or not to authorize drilling. and construction projects.
If all assessments of the impacts of drilling on public lands were to include the potential warming impact of burning fuels in leases, experts said, it would create the legal basis for the government to stop issuing new leases. drilling.
But moving forward with such a policy would most likely face political backlash from Republicans, the oil industry, and Democrats in the oil and gas states. It could also complicate the administration’s efforts to steer its broader spending bill through a Democratic majority in Congress.
“The political tightrope is vexatious, but the bottom line is that we need to end the leasing of oil and gas on public lands,” Clement said. “It’s no exaggeration to say that this would change the global conversation on energy transition. “
Lisa Friedman contributed report.