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Biden Administration Considers Hiking Royalty Rates For Oil

The Biden administration seems to be considering an increase in royalty rates for oil companies operation onshore, Reuters has reported, citing an accidental release of a draft notice posted on the website of the Bureau of Land Management that was later removed.

The proposed increase, according to the draft notice, is to 18.75 percent, compared with a minimum 12.5 percent required by law, the report noted. It also added a comment by an Interior Department official who said, "The BLM accidentally posted some pre-decisional draft language on their website."

Higher royalty rates for onshore drillers would be keeping with the Biden administration's push into renewables and away from fossil fuels. It would also aggravate an already tense relationship between Washington and the oil industry made so by the very same push.

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Despite this push, however, the federal government was forced by a court order to hold an offshore lease sale last year, after a group of oil-producing challenged the moratorium in court. In June, a federal judge granted a preliminary injunction to Louisiana and another 12 states that sued the administration over the drilling moratorium.

That court decision forced the federal government to hold an offshore lease sale, which turned out to be the biggest in history. The auction brought in $192 million in winning bids for 307 tracts covering 1.7 million acres. The interest around the sale was significant in part due to the low carbon footprint of the crude extracted from these waters.

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Yet the lease sale did not go unchallenged either. A group of environmentalist organizations, including the Sierra Club, Earthjustice, the Center for Biological Diversity, and Friends of the Earth, sued, accusing the Bureau of Ocean Energy Management of breaking the National Environmental Policy Act by failing to make an assessment of the emissions resulting from the lease sale.

"Barreling full-steam ahead with blinders on was simply not a reasonable action for BOEM to have taken here," said District Judge Rudolph Contreras, who voided the lease sale and sent it back to the Interior Department, which now has to decide what to do with it.

By Charles Kennedy for Oilprice.com

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