The Biden administration finally announced that it will restart federal lease sales on Friday, with final notices set to be published today. But while the announcement should be welcome news after more than a year of delays and uncertainty, a 50-percent higher royalty rate and significantly reduced acreage offered only add to the mixed messages being sent by the administration.
Interior Secretary Deb Haaland said in the department’s press release that “How we manage our public lands and waters says everything about what we value as a nation,” and yet, the announcement does little to reduce the uncertainty around America’s federal energy development. As the Independent Petroleum Association of America’s Jeff Eshelman said:
“It’s a mixed message and strangely incoherent. This Administration has begged for more oil from foreign nations, blames American energy producers for price gouging and sitting on leases. Now, on a late holiday announcement, under pressure, it announces a lease sale with major royalty increases that will add uncertainty to drilling plans for years. To put it simply, America, under this Administration, has no coherent energy policy.”
The announcement comes more than a year since President Biden issued Executive Order 14008 that stopped federal oil and natural gas leasing. It’s been 10 months since a federal judge ruled the order to be an illegal ban and nearly six months since the administration published its leasing review, which was justified as the reason for the ban in the first place.
The Good Friday announcement – following a holiday release trend that began with the Department of Interior’s Black Friday leasing report – comes with two major changes since new environmental reviews for onshore acreage were announced last year:
- Reducing the acreage offered by 80 percent.
- Raising the royalty rate to 18.75 percent for new competitive lease sales.
It’s basic economics: increasing the cost of production and reducing the available supply will restrict development at a time when the global energy supply is being outpaced by demand and Americans are paying increasingly higher prices as a result.
This is despite the Biden administration claiming that it wants to boost domestic production to battle record-high gasoline prices while also saying “that there is nothing standing in the way of domestic oil production.”
As Kathleen Sgamma, the president of the Western Energy Alliance, said:
“While we’re glad to see [Bureau of Land Management] is finally going to announce a sale, the extreme reduction of acreage by 80 percent, after a year and a quarter without a single sale, is unwarranted and does nothing to show that the administration takes high energy prices seriously. The sales being considered were the ones that had already been fully analyzed at the end of the Trump Administration and were ready to go before the Biden Administration decided to redo the analysis.
“Raising the royalty rate 50 percent increases the costs of production on federal lands, which already carry a higher cost than nonfederal lands. This increased tax will have the effect of any other tax increase–you get less of what’s taxed, in this case, federal oil and natural gas. At a time when the administration should be increasing production, it continues to introduce new policies that further depress American production and keep gasoline prices high.”
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