What to Know About the Rate Increases for Drilling on Public Lands

The Biden administration raised the royalty rates that fossil fuel companies pay the government in order to drill and mine on public lands, the first time since 1920 that those fees have increased. And it raised by tenfold the size of bonds that companies must secure before they can drill, the first time they went up since 1960.

One way to think about it is this: the nation’s largest property owner, the federal government, effectively charges rent to oil and gas companies that exploit public land for private profit. The system was set up more than 100 years ago to encourage energy development.

Here’s what to know about the changes announced Friday:

No. Despite a pledge he made as a candidate (“No more drilling on public lands, period”), Mr. Biden has not stopped oil and gas drilling on federal land or in federal waters. But raising royalty rates that have stayed the same since 1920 is one way the administration can make drilling reflect the modern costs of the activity and the toll on the land. The federal rate has been significantly lower than what many states and private landowners charge for drilling leases on state or private lands.

The government estimates that the new rules would increase costs for fossil fuel companies by about $1.5 billion between now and 2031. About half of the money collected would go to states, approximately a third would be used to fund water projects in the West, and the rest would be split between the Treasury Department and Interior. The administration said the proceeds would help to clean up the environmental damage from approximately 3.5 million oil and gas wells on federal property that have been abandoned. Many of those wells were not property capped when they were discarded, often by companies that went bankrupt, and they can leak methane, a powerful planet-warming pollutant that is a major contributor to global warming.