The Bureau of Land Management is proposing new oil and gas leasing restrictions on millions of acres in Colorado and across the nation, raising royalty rates and tightening cleanup rules while making it harder to nominate parcels for leasing on federal lands.
The proposed oil and gas leasing rules now up for public comment are the latest evidence the BLM is steering management of its enormous holdings toward greener pastures. The agency has made other recent moves to put conservation and recreation on equal footing with extractive industries that produce millions of barrels of oil a day on federal land, and to protect hundreds of thousands more acres on Colorado’s Western Slope.
The draft rules offer “a holistic approach to modernize and reform the oil and gas program for the 21st century that’s really long overdue, and desperately needed,” said Jim Ramey, the Grand Junction-based Colorado director for The Wilderness Society. The group says the rules will make oil and gas companies “pay a fairer share for extracting public resources, cover the cost of cleanup and restoration after drilling is finished, limit participation of bad actors and put guardrails on what lands are offered for oil and gas leasing.”
The flurry of green-friendly rules and resource plans from BLM, meanwhile, have infuriated oil and gas trade groups. They say cutting off more federal land to drilling simply shifts greenhouse gas emissions to other U.S. land or foreign countries, while penalizing responsible operators.
“This has been on the wish list of the environmental lobby — which now runs the Department of the Interior — for a long time,” said Kathleen Sgamma, president of Western Energy Alliance, a Denver-based nonprofit trade group for petroleum producers in 13 states. “They love to increase costs on the industry. The intent is definitely to drive development off of federal lands.”
That the Biden administration wants to slow or end oil development on BLM land is no surprise, Sgamma added. Biden pledged “no more drilling on federal lands, period” during the 2020 campaign. He did freeze new leases on federal land once taking office.
But permits for drilling on land leased years ago are still being issued, at even higher volume than during the Trump administration. Environmental groups harbor an equal if opposite anger at the administration over that fact, including the controversial recent approval of ConocoPhillips’ Willow Project on federal land in Alaska.
Still, national and Colorado environmental activists are optimistic the new BLM rules can slow leases that would lead to future drilling. And the oil companies harbor an equal and opposite suspicion they are right.
“There are many regulatory levers the administration can use when it comes to public lands development, and they’re pulling every single one they can,” the energy alliance’s Sgamma said. “We’re seeing this whole-of-government approach from the Biden administration, and they’re not shy about talking about it. So it’s not me being paranoid.”
Earlier this year, BLM advanced its so-called Public Lands rule, which would put conservation on a more equal footing with drilling and mining, livestock grazing and recreation. The agency, which controls 8.3 million acres of land and 27 million acres of mineral rights in Colorado alone, is also finishing a national Renewable Energy rule, meant to ease development of solar, wind and transmission on federal lands.
Public comments are also open for BLM’s proposal for a more protective resource plan, or blueprint for allowed uses, on 1.5 million acres of Western Slope wildlands in Colorado. The BLM’s preferred alternative for the long-term resource plan would sharply restrict acreage available for leasing nominations by oil explorers.
The public’s chance to comment on the latest proposed changes to the oil and gas rule runs through Sept. 22. The rules would cover all onshore oil and gas leasing in the United States. Here are some highlights:
- The rule would implement a new 16.67% royalty rate for oil extracted from future leases on federal land, carrying out orders included in the Inflation Reduction Act. The rate on existing leases is 12.5%, far lower than the federal offshore royalty rate and the tariffs charged by many states on nonfederal land. Colorado’s rate is 20%, according to The Wilderness Society, which cites studies showing BLM lands in Colorado would have raised tens of millions of dollars more for taxpayers if the federal land royalty rate had been adjusted sooner. Royalties on nonfederal Texas land range from 20% to 25%.
- Per-acre rental rates for BLM land, which are paid whether or not oil is extracted, would also rise significantly under the rules. Rentals per acre would rise to $15 a year over the life of the lease.
- Also included are more stringent bonding requirements pressuring the oil companies to clean-up and plug abandoned wells on federal leases when production ends. Colorado has hundreds of orphaned or abandoned wells on nonfederal land, leading to toxic leaks or explosions, and state regulators have tried to tighten bonding and cleanup obligations here.
- Companies would have to pay a new per-acre fee to “express interest” in or nominate BLM property for leasing. Environmental groups believe that would prevent oil companies locking up even unpromising land just to keep it out of permanent conservation set-asides.
Coalitions of environmental groups are urging the public to send in supportive comments before the review period closes.
“These changes were badly needed — to put it mildly — and will help make onshore leasing more fair to taxpayers and hold industry accountable for its harms,” said Josh Axelrod, senior policy advocate with the Natural Resources Defense Council. “The agency is aiming to limit leasing to areas with existing development and the most viable resources.”
Locking in new royalty rates dictated by the Inflation Reduction Act is itself a key attraction of the oil and gas rule, Ramey said. “We’ve missed out on tremendous amounts of money because of those really rock bottom royalty rates,” he said.
Industry voices point instead to specifics of the new rules that seem to them “arbitrary and capricious,” aimed at discouraging new leasing altogether rather than tackling real oil development problems.
Sgamma said the requirements that companies pay a $5 per-acre fee just for suggesting a parcel go into leasing auctions will cut out smaller companies from federal land use.
“Having to pay for something that may never come up at auction is certainly not equitable,” Sgamma said. “You’re paying for nothing in that case. So I think there should be some flexibility in the implementation of it.” The government, for example, could require a nomination payment only from the winning company after a parcel has been auctioned, she suggested.
The higher bonding and cleanup requirements also discourage smaller operators, and send the signal that federal officials don’t want any new leasing, Sgamma said. There are very few orphaned wells on BLM land to worry about, the energy alliance said.
“We don’t want any orphaned wells, of course, but you do have to put it into context. Thirty-seven orphan wells out of 89,000 producing wells is a very small problem,” Sgamma said. “The problem is being taken care of. For BLM to turn around and put in place a prohibitive bonding system is … a rule in search of a problem.”