The attempt to block the O&G rule is another industry leaflet that harms taxpayers

When the Bureau of Land Management finalized onshore oil and gas leasing rules in April 2024, it completed work that government regulators and frontline communities had been calling on the agency to complete for decades. Now, some members of Congress want to permanently limit BLM’s ability to successfully conduct its onshore oil and gas development program – a move that could cost taxpayers hundreds of millions of dollars in lost revenues and new liabilities.

How can Congress do this? The answer is the Congressional Review Act (CRA), a law that gives Congress the ability – by passing laws called “joint resolutions of disapproval” – to veto executive branch actions by repealing laws it doesn’t like. The theory behind the CRA is that because Congress grants administrative power to executive agencies, Congress should exercise some oversight over what the agencies do with that power. Unfortunately, the CRA is often used as a blunt instrument to block reforms and score political points. And that’s exactly what’s happening here.

As a reminder, BLM’s oil and gas leasing rules are largely a blueprint for implementing the reforms Congress passed in the Inflation Reduction Act (IRA). These reforms are hardwired into current law and apply to the onshore oil and gas program, regardless of whether Congress succeeds in blocking the rule or not. In brief, these reforms include:

• Higher royalty rateswhich will increase from 12.5%. to 16.67 percent – or at least 20 percent in the case of restored lease agreements – until 2032. After 2032 – when the IRA fiscal terms expire – royalty rates will remain at 16.67%.
• Higher minimum rates– which companies offer at lease auctions to secure the right to lease land for oil and gas production – will increase from $2 per acre to at least $10 per acre by 2032. After the IRA expires, the final rule ties further minimum wage increases to inflation.
• Higher rental rates, which will increase from $1.50 per acre to $3 per acre. Rents will then increase at specified intervals to encourage development or lease abandonment, with rents reaching $15 per acre after the ninth year or $20 per acre for a reinstated lease. The post-IRA final rule ties further rent increases to inflation.
• Some ‘expression of interest’ fee. an amount of $5 per acre for companies wishing to nominate – or suggest – acres for lease as part of a future lease sale.
• Some end of uncompetitive leasingwhich allowed companies to anonymously obtain leases at discounted prices, but rarely resulted in the development of this type of leasing.

The industry likes to portray this rule as solely responsible for raising all these fees, but this is a flawed approach designed to distract from two important truths. First, Congress increased these fees by lawThis happened because regulators such as the Government Accountability Office had indicated for decades that they were at woefully low levels, prompting speculation but not development of mineral resources. Second, generally speaking, these fees are generally consistent with rates charged on public lands where oil and gas activities occur. In other words, at best, the IRA provisions implemented by this rule level the playing field.

The second package of reforms updates laws that have existed long before the IRA’s founding and have a proven insufficient track record to ensure the responsible development of federal lands. Like the foundations of this principle in the IRA, these reforms build directly on decades of congressional findings in the Mineral Leasing Act and the Federal Land Policy and Management Act. Specifically the rule:

• Increases the setting speed from $10,000 to $150,000 for a lease and statewide security for multiple wells from $25,000 to $500,000. Additionally, this rule ends the terrible practice of nationwide bonding, which has allowed the industry to cover all of its liabilities across the country with a single, minimal bond valued at significantly less than the actual cleanup costs a company incurs in extracting oil and gas. Under the old regulations, bond levels were so low that in 2018 BLM held only $2,100 per well, an amount at least 10 times less than the cost of plugging and remediating the cheapest and simplest oil and gas wells. This is a critical change because there are currently more than 90,000 open wells on federal public lands that will need to be plugged – and that number represents a huge, uncovered liability to U.S. taxpayers if bond levels are not raised.
• Formally adopts existing guidance on the BLM’s use of preference criteria checking designated leasehold parcels for potential conflicts with other important values, such as wildlife habitats, cultural resources, sacred sites, and recreational areas. This approach has allowed the BLM to better target leasing and development only to areas with a high likelihood of development.
• Sets a three-year validity period for newly issued drilling permits, which will now expire if developers do not start working on lease agreements. This change is intended to encourage careful development of leases, reduce administrative costs associated with the overburdened BLM, and reduce permit stockpiling.

If Congress succeeds in blocking this rule, not only will it be struck from the books, but under the terms of the CRA, the BLM will be barred from ever enacting a similar rule in the future. This would mean that the looming threat of defaults arising from insufficient collateral was starting to come true, with history showing that taxpayers – not industry – would be on the hook. But blocking this rule would also result in chaos, inefficiency, and higher costs for the BLM trying to implement IRA fiscal reforms without the certainty of an enforceable implementing regulation. This could jeopardize millions of dollars in revenue generated by oil and gas rents and royalties that this rule is intended to help the BLM manage and collect effectively.

If adopted, the joint resolution of disapproval invalidating the onshore oil and gas leasing rule would circumvent and undermine the administrative process, effectively preventing the BLM from carrying out its mandate to oversee the federal leasing program. It would also undermine the overwhelming public support for this government. Over 250,000 public comments were received during the 60-day comment period on the rule, with over 99 percent supporting promulgation of the rule.. This attempt by Congress to subvert the administrative process and act against the will of the public is nothing more than an attempt to pass more aid to an industry that is making record profits.

This reckless legislative effort should be treated with the seriousness it deserves and set aside. The oil and gas industry has benefited from closing our shared public lands for long enough periods of time.