Oil and gas companies must pay more to drill on federal lands under new Biden administration rule

WASHINGTON (AP) — Oil and gas companies will have to pay more to drill on federal lands and satisfy stronger requirements to clean up old or abandoned wells under a final rule issued Friday by the Biden administration.

The Interior Department’s rule raises royalty rates for oil drilling by more than one-third, to 16.67%, in accordance with the sweeping 2022 climate law approved by Congress. The previous rate of 12.5% paid by oil and gas companies for federal drilling rights had remained unchanged for a century. The federal rate was significantly lower than what many states and private landowners charge for drilling leases on state or private lands.

The new rule does not go so far as to prohibit new oil and gas leasing on federal lands, as many environmental groups have urged and President Joe Biden promised during the 2020 campaign. But officials said the proposal will lead to a more responsible leasing process that provides a better return to U.S. taxpayers and focuses oil and gas drilling in areas most likely to be developed, especially those with existing infrastructure and a high potential for oil and gas reserves.

The rule also will increase the minimum leasing bond paid by energy companies to $150,000, compared with the previous $10,000 established more than 60 years ago. The higher bonding requirement is intended to ensure that energy companies meet their obligations to clean up drilling sites after they are finished drilling or cap wells that are abandoned.