“No more drilling on federal land,” former vice president, Delaware senator and presidential candidate Joe Biden said in March 2020. Debating his then-competitor Bernie Sanders on CNN, Biden urged: “More drilling, including offshore, no ability for the oil industry to continue drilling, period.
On July 1, President Joe Biden’s administration introduced a new draft plan to open oil and gas drilling leases in federal waters off the coast of Alaska and in the Gulf of Mexico. Released the Friday before the Fourth of July holiday weekend, the plan represents a direct reversal of not only Biden’s campaign promises, but also his early policies as president. On his first day in office, Biden declared a moratorium on such leases, barring the Interior Department from issuing new permits on federal lands. (The moratorium did nothing to stop drilling under existing permits — which many large fossil companies had preemptively stockpiled.) In April, the administration announced it would resume selling new permits, and according to the draft plan released Friday, the Gulf of Mexico and Alaska coast would be among the approved sites.
The April announcement showed “a first-ever increase” in the royalty rate for new competitive leases on public lands – from 12.5% to 18.75% – intended to soften the blow of the resumption of drilling in l ‘packing it with extra revenue for the federal government and, theoretically, forcing fossil fuel companies to pay more. In a study released in June, the progressive nonprofit advocacy group Public Citizen recommended that all drilling on federal lands be subject to the highest rate after decades of no increase in royalties. The previous June, the group released another report showing that Biden had, by then, already exceeded the average monthly number of drilling permits on public lands issued under former President Donald Trump.
The rate hike put in place by the Biden administration is not permanent and does not apply to areas affected by the draft plan. As the recent Public Citizen study notes, federal waters beyond a depth of 200 meters were already subject to an 18.75% royalty rate. The rate increase only applies to onshore drilling, Interior Department spokeswoman Melissa Schwartz told The Intercept, allowing offshore drilling that does not meet the 200 threshold. meters to remain exempt. According to Schwartz, new leases in the Gulf of Mexico and off the coast of Alaska would be subject to royalties of between zero and 11%.
In addition to not being permanent, the increase in royalties is also not retroactive. Like the lifted moratorium, this would not affect permits issued before the policy was implemented. Public Citizen’s study showed that high gasoline prices this year have generated record profits for the oil and gas industry – which have only been inflated by decades of low royalty rates. Twenty major onshore drilling companies – including Devon Energy, ConocoPhillips and ExxonMobil – would have paid more than $1 billion in royalties last year, the study found, had they not been subjected to outdated rates and artificially low.
“In a year of record oil profits and inflation, the oil and gas industry is taking advantage of unprecedented tax breaks, subsidies and exemptions,” said Alan Zibel, research director at Public Citizen, in a statement to The Intercept. “At the very least, these companies should pay a fair price for the resources they extract from public lands and be required to cover the cost of cleaning up the environment at no additional cost to taxpayers.”
Cleanups and fee increases, however, only provide a partial solution. The current rate increase could be reversed as easily as it was implemented, and even if made permanent, any drilling on federal lands runs counter to efforts to curb climate change and reduce dependence on fossil fuels. Nothing would be as effective in stopping the production of fossil fuels – and its emissions – as a total ban.
Instead, Biden proposed a gas tax exemption to make pump prices cheaper for consumers. Under White House terms, Congress could suspend the federal gas tax for three months “to give Americans a little more breathing room.”
Below-market rates for drilling on federal lands have diverted nearly $6 billion from U.S. taxpayers to oil and gas companies over the past decade.
Certainly, high gasoline prices hit the poor and working class the hardest. But there’s no guarantee that suspending the federal gasoline tax would reduce the cost of gasoline for consumers, especially if oil and gas companies have a say in the matter. A recent study of state-level gasoline tax exemptions found that the savings were “primarily” passed on to consumers in the form of lower gasoline prices, but that these price reductions often did not last for the duration of the tax suspension. And the current federal drilling tax structure offers little incentive for oil and gas companies to pass on those savings. Below-market rates for drilling on federal lands have diverted nearly $6 billion from U.S. taxpayers to oil and gas companies over the past decade.
In the UK, by contrast, Prime Minister Boris Johnson’s government announced in May that it would impose a 25% tax on the profits of oil and gas companies to ease pressure from rising living costs in the UK. country. “The oil and gas sector is making extraordinary profits,” said Rishi Sunak, the recently deceased Chancellor of the Exchequer, announcing the new measures. “I support the argument of taxing these profits fairly.” (The tax, he promised, would not last beyond 2025.)
“As gas prices soar at the pump, these oil and gas drillers aren’t just squeezing drivers, they’re also gouging taxpayers,” Public Citizen’s Zibel said. “With the industry set to post the highest profits on record this year, now is the perfect time for Congress and the Biden administration to shed longstanding giveaways to the oil and gas industry.”
From hurricanes to heat waves, the impacts of the climate crisis have worsened with the seasons. In response, an increase in fossil fuel royalties is not drastic. Even Republican Senators Chuck Grassley, R-Iowa, and Jacky Rosen, D-Nev., introduced a bill last year to adjust rates based on the economy. (It was sent to committee but never voted on; Sen. John Hickenlooper, D-Colo., was the bill’s only other co-sponsor.)
When asked if the Department of the Interior would make the rate increase for drilling on federal lands permanent, Schwartz pointed The Intercept to the department’s existing public statements and a November report outlining the reform and the regulatory direction of the department. The White House had no comment.