BLM’s Long-awaited, Much-anticipated Oil and Gas Rule is Finally Here

It’s finally here! The Department of the Interior and the Bureau of Land Management have finally issued a draft rule to reform the federal onshore oil and gas leasing program.

First promised in a report issued in November 2021, the new oil and gas rule is a common-sense action that both codifies and builds upon historic reforms that Congress secured in the Inflation Reduction Act. The rule will finally bring about critical improvements to a broken federal oil and gas leasing program that has stood in the way of protecting public lands Montanans cherish. It will limit speculative leasing practices that have undermined the BLM’s multiple-use mandate, harmed wildlife habitat, and enabled lease-holding companies to walk away from well sites without cleaning them up. We desperately need this rule in place if we want to pass healthy public lands and waters in Montana on to the next generation.

All in all, the proposed rule helps ensure the program works for everyone – not just the oil and gas industry. It also offers durable reform and addresses other issues that have long plagued the program, which the Interior Secretary has the authority to act upon.

The Biden administration’s oil and gas rule is also a long-overdue win for Western communities. For years, the Government Accountability Office – an independent, nonpartisan watchdog agency – has cited the DOI’s oil and gas leasing program as a “high risk” program, “vulnerable to waste, fraud, abuse, and mismanagement.” The last time the government made any effort at reforming the system was in the mid-1980s, and those reforms only went so far. Those efforts left many issues that date back to the 1950s and 1920s standing and are themselves now wildly out of date.

The BLM manages the most public land of any agency in the country and in the state of Montana. The agency currently considers nearly 90% of the land it manages as suitable for oil and gas leasing. It doesn’t matter if that land offers any real potential for production or if wildlife habitat, cultural resources, and recreational opportunities would be negatively impacted by leasing and development. This broken system is tipped wildly in favor of private industry’s use of our public lands. It takes agency attention and resources away from managing those lands for things like wildlife habitat, water quality, and recreation opportunities and allowing companies to collect record profits while only paying pennies on the dollar for access to our shared resources. At the end of the day, local communities are all too often left with pollution and diminished access to healthy public lands.

This proposed draft rule follows the GAO’s recommendations and meets demands that the American public has been making of our government for several years now.

In sum, the rule proposes to:

• Hold oil and gas companies responsible for cleaning oil and gas wells after production has ended. This will help ensure that taxpayers are not left paying for the cleanup and that public lands, water, and wildlife habitat are not contaminated by orphaned wells. Notably, the DOI is proposing to raise minimum federal bonding rates to more closely reflect the true costs of plugging and reclaiming well sites. The rule also proposes to eliminate the use of nationwide bonds, which currently allow oil and gas companies to drill enormous numbers of wells across the country that are all covered by a single, inadequate bond.
• Ensure taxpayers receive a fair return on private industry’s use of land and resources that belong to all of us. The rule raises the minimum bid on leases, as well as increases the royalty and rental rates that oil and gas companies must pay to drill on public lands, all of which were secured into law with the Inflation Reduction Act. The DOI also proposes that, after the 10-year period following the IRA’s enactment, the rental rates and minimum lease bid will be indexed for inflation.
• Wipe noncompetitive leasing off the books entirely. Following the IRA’s elimination of noncompetitive leasing, the proposed rule removes all references to or allowances for noncompetitive leasing from the Code of Federal Regulations. All federal lands may now be leased for oil and gas only if purchased at a competitive auction for no less than the minimum bonus bid. Aligning federal regulations with federal statutes is essential for the longevity of these reforms, reducing the risk of misinterpretation or misapplication of federal law in the future.

Wild Montana is excited about these reforms, but we think there are a few places where the DOI can and should strengthen the final rule. A few of these include:

• DOI and BLM should not be allowed to lease lands with little or no drilling potential at the expense of other valuable uses, like wildlife habitat conservation and outdoor recreation. The BLM should codify in its regulations that lands found to be in conflict with any of the established screening criteria are unavailable for leasing. Similarly, DOI should clearly codify that lands with little to no development potential be unavailable for future leasing.
• DOI should also be required to review and make necessary updates to the onshore royalty rate, rental rates, and minimum bid at regular intervals. This will help ensure that these rates and fees continually align with larger economic trends and that taxpayers continue to receive a fair return on the oil and gas industry’s leasing and use of publicly-owned resources.
• DOI and BLM should require companies to address inactive wells within two years – to either put the wells back into production or formally begin the reclamation process. This will help avoid inactive wells from lingering on public lands for years.
• DOI and BLM should strengthen its proposed definitions for who should be allowed to lease and develop our public resources by creating a screening process that identifies bad actors and prevents them from nominating parcels for lease and participating in lease sales. This list of identified “bad actors” should be available to the public for accountability and transparency.

Our federal oil and gas leasing program hasn’t been updated in decades, so this rule is a huge step in the right direction. To be sure, the world needs to halt fossil fuel emissions if we want to have a liveable climate in the future. This rule can help ensure that fossil fuel development going forward is responsible as society invests in the necessary infrastructure updates to transition to renewable energy sources.

The DOI is accepting public comments on the rule until Sept. 22, 2023.

Comment now on this once-in-a-lifetime opportunity to fix our badly broken federal leasing program.