In defense of the BLM’s Oil and Gas Rule
Big Oil and its allies say the rule will ruin the industry. Here’s why they’re wrong.
The oil and gas industry and its allies in Congress are erroneously claiming that President Joe Biden is waging a war on fossil fuels. They’ve taken aim at the Bureau of Land Management’s proposed oil and gas rule, which was finalized April 12, 2024, claiming that it is proof the president is trying to end oil and gas production on federal lands.
“The president has vowed to end drilling on federal lands. This rule confirms it’s a vow he intends to keep,” Senator John Barrasso of Wyoming told Fox News when the draft rule was published last summer. Western Energy Alliance President Kathleen Sgamma similarly characterized the rulemaking as an attempt to shrink drilling on federal land.
But with the oil and gas industry having 23.2 million acres of public lands already under lease — and plenty of access to the millions more public lands acres that remain open to additional oil and gas leasing — there is hardly a war being waged on domestic energy production. In fact, the U.S. is currently producing more oil per day than any country in history. The U.S. produced 13.2 million barrels of crude oil per day in December 2023 — that’s 200,000 more barrels each day than was being produced at the industry’s peak during the Trump administration. Nearly 50 percent more permits to drill on federal lands have also been approved in the past three years than were approved in the first three years of the Trump administration, meaning the oil and gas industry has continued to maintain its wasteful public lands stockpile.
Rather, what the BLM’s oil and gas rule does include are a number of important reforms that will help protect both public lands and taxpayers. First, the rule codifies the reforms to the federal leasing process that were passed by Congress in the Inflation Reduction Act. These include increases to the royalty rate for onshore oil and gas leases and other leasing fees, a new fee to nominate acreage for future lease sales, and the elimination of the highly speculative practice of noncompetitive leasing. Those changes all went into effect in August 2022, when the IRA was signed into law. The BLM outlined its approach to implementing them at the bureau-level through several instructional memoranda issued in November 2022. The oil and gas rule will now further ensure both that the new policies are reflected in the regulations that govern the official leasing process and that their robust application is carried out uniformly on federal public lands across the country.
A year and half into this new federal leasing regime, the oil and gas industry is doing extremely well financially. Despite a drop in global oil and gas prices last year, ExxonMobil and Chevron still posted their second largest profits since 2012 and 2013, respectively. Both companies increased domestic production in 2023 in order to keep profits up and shareholders happy. Much of that drilling occurred in the Permian Basin, which includes federal land in New Mexico. These earnings allowed Chevron to make record payouts to shareholders, while ExxonMobil made the highest payouts of any U.S. oil company. Meanwhile, BP also posted a larger-than-expected profit in 2023, boosting its share buyback program. Clearly, the IRA’s reforms are not having a significant effect on the oil and gas industry’s bottom line.
The BLM’s oil and gas rule also includes increases to the minimum bond amounts for federal oil and gas leases — which the Government Accountability Office warned were too low back in 2019. Bonds are essentially insurance money that oil and gas companies put up before they drill wells to ensure that there will be enough money available to clean up the wells if the company goes bankrupt or abandons the wells. Unplugged wells pose multiple environmental threats, including leaking planet-warming methane gas into the atmosphere and contaminating groundwater.
The oil and gas industry has said that the bonding increases in the rule are unnecessary and that they will hurt small producers. “For BLM to turn around and put in place a prohibitive bonding system is … a rule in search of a problem,” Sgamma told the Colorado Sun. Meanwhile, American Petroleum Association Executive Vice President Dan Naatz told E&E News, “These excessive increases on bonding rates and other activities will hamper independent producers’ ability to operate on federal lands.”
Both of these claims are easily disproved by data. The first, that existing bonding requirements are sufficient, is debunked by the GAO, which found that only between one and 16 percent of federal bonds are sufficient to cover the full cost of cleaning up the wells they apply to. There are approximately 16,000 orphaned wells on public lands, according to the Interior Department, and the federal government is currently using $250 million in funding from the Bipartisan Infrastructure Law to plug those wells and identify new ones. Clearly, bonding rates are not high enough, if taxpayers are paying to clean up these wells.
The BLM’s changes to the federal bonding system are also not unprecedented, as several states have made changes in recent years to the bonding requirements for drilling on state lands. In 2015, for example, the state of Wyoming enacted important updates to its minimum bonding rates for wells on state and private lands. A recent report by Accountable.US found that Wyoming’s action helped decrease the threat of orphaned wells across the state while having a negligible impact on the oil and gas industry’s ability to drill. Production actually increased following the change, driven by new wells drilled under the new bonding rates. Based on this evidence, it’s fair to conclude that the action BLM is taking to strengthen federal bonding rates, as leading oil and gas states have done themselves to state bonding provisions in recent years, will save taxpayers from having to foot the bill for more cleanup and not significantly dampen energy development on public lands.
In a joint letter to the BLM about the rule, major players in the oil and gas industry actually admitted that they “support BLM’s goal of ensuring fair returns for the American public from activities on public lands.” And while the groups could have offered technical feedback on the proposed policy changes, including making the case for keeping bonding rates at their current levels, they did not. Whether that indicates that industry agrees the current rates are insufficient or not is unclear — but it is notable that in a letter where they ostensibly sought to oppose any changes to the oil and gas leasing system, they didn’t ask the BLM to keep bonding rates the same. That provides further evidence for why the regulatory changes included in the BLM’s new rule are, in fact, common sense and long overdue.
Lastly, the BLM’s oil and gas rule directs the agency to prioritize leasing in areas with high potential for development where production is already occurring, while steering new leasing away from environmentally-sensitive areas and areas that have little to no potential for development. Codifying the agency’s use of leasing preference criteria is essential not only for protecting public lands that have important values other than oil and gas, but also for preventing public lands from getting tied up in speculative leases. Under the Trump administration, the BLM held “fire-sale” leases all over the West, resulting in nearly 8 million acres of industry-nominated public lands being offered for lease — 60 percent of which oil companies either chose to pass up or purchased for the minimum lease bid. As of Fiscal Year 2023, nearly half of the public lands acreage that the industry has under lease — more than 10.7 million acres — are now lying idle, preventing the BLM from managing these acres for more valuable uses such as conservation and recreation. More informed decision-making when it comes to which lands are prioritized for leasing will help put an end to this wasteful trend.
Companies are now also required to pay a $5 per-acre fee when nominating public lands to be offered for lease by the BLM, thanks to the IRA. Prior to this change, companies could nominate–for free and anonymously–huge amounts of public land that they had no intention of bidding on. This wasted public agency time and resources, as the BLM had to process all of the nominations, even those that were submitted inside of national parks and other areas that are not eligible for leasing. The $5 per-acre nomination fee has significantly reduced abuse of the federal onshore nomination system and has revealed that industry is actually interested in far less land than they were previously nominating. In 2023, companies nominated just 94,361 acres for oil and gas leasing, 99 percent less than they were nominating each year, on average, in the decade prior to the passage of the IRA (CY2012-CY2021).
Finally, it’s important to remember that the BLM has continued to march ahead with oil and gas lease sales. Nearly 294,000 acres of public lands were offered for lease in 2023. Oil and gas companies displayed limited interest in taking advantage of what was offered to them over this time, bidding on only 55 percent of the acres put up for auction. All of this goes to show there is plenty of land available to be leased by industry as well as plenty of land already under lease that could be tapped for oil. The BLM’s rule rightly focuses on offering for lease only those remaining public lands that are not in sensitive areas, such as areas that contain important values including wildlife corridors and cultural resources.
Given all of this evidence, it’s clear the hysteria the oil and gas industry has generated over the BLM’s oil and gas rule is simply the industry’s attempt to gaslight the American people. Oil and gas companies and their allies know the rule won’t significantly hurt their bottom line or decimate drilling on federal lands — in fact, oil and gas regulatory changes have been enacted at all levels of government in recent years, and the industry has been able to weather those changes just fine in the places where companies have always had a legitimate interest in leasing and drilling. Rather, the BLM’s oil and gas reforms will simply implement long overdue updates to the federal leasing system, which has been driven by the oil and gas industry for over a century.
