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President Biden has decided to remove a moratorium on oil and gas drilling on federal lands in a U-turn from campaign promises to prioritize a shift away from fossil fuels.
According to a release by the Department of the Interior, this week will see some 144,000 acres put up for leasing, with the department noting this is a much smaller acreage than previously nominated—some 80 percent smaller.
In addition to that, the Department of the Interior will increase royalty rates for new leases to 18.75 percent and said that bidders would be held to stringent environmental standards.
“How we manage our public lands and waters says everything about what we value as a nation. For too long, the federal oil and gas leasing programs have prioritized the wants of extractive industries above local communities, the natural environment, the impact on our air and water, the needs of Tribal Nations, and, moreover, other uses of our shared public lands,” said Interior Secretary Deb Haaland.
“Today, we begin to reset how and what we consider to be the highest and best use of Americans’ resources for the benefit of all current and future generations.”
The move, however, would mean higher costs of developing the oil and gas resources on federal lands opened up to the industry at a time when costs are already climbing and acting as a deterrent despite strong oil prices.
According to Frank Macchiarola, senior VP at the American Petroleum Institute, the new lease terms could “discourage oil and natural gas investment on federal lands.”
“We are concerned that this action adds new barriers to increasing energy production, including removing some of the most significant parcels,” Macchiarola told the Financial Times.
It also goes against Biden’s energy agenda, which focused on curbing oil and gas drilling activity in favor of renewable energy.
Yet very much like the calls on the industry to boost production, the removal of the federal land drilling moratorium could be chalked up to a “Desperate times call for desperate measures” situation in U.S. energy.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.