07 December 2021

U.S. Department of the Interior Releases Report on Federal Oil and Gas Leases

On November 26, 2021, the U.S. Department of the Interior (DOI) issued a long-anticipated report on federal oil and gas leases. The report focuses on the fiscal terms, leasing process, and remediation requirements of federal oil and gas leases. Notably, however, it does not discuss the possibility of banning new leases.

As part of its management of public lands, the DOI, through the Bureau of Land Management (BLM), oversees the use of hundreds of million acres of public lands and billions of acres of submerged land on the Outer Continental Shelf. A significant component of BLM’s management of these public lands includes permitting oil and gas drilling operations. In January 2021, President Joe Biden issued Executive Order 140008, requiring DOI to review federal oil and gas leasing and permitting processes. DOI’s report first addresses the fiscal terms of leases on federal lands and recommends increasing costs by, for example, increasing lease prices and royalty rates. DOI also recommended taking steps to ensure remediation at oil and gas leases by increasing bonding and financial assurance requirements. Additionally, DOI recommended that BLM change its process for nominating land for oil and gas leases to ensure that low-potential land — land unlikely to yield significant oil and gas production — are not nominated for bids.

The report sounds a different note than President Biden did during his presidential campaign. During the campaign, President Biden took the position that his administration would not allow any new oil and gas drilling leases on public land. The DOI report, however, appears focused on how to improve revenue from such leases and otherwise improve processes associated with them. In addition to any changes implemented by BLM, industry participants should monitor the potentially conflicting messages on the subject of oil and gas leases on public land.

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