The Senate Energy and Natural Resources Committee’s section of the Build Back Better Act was released on December 17, 2021. Despite some changes to and removal of certain provisions, the most import oil and gas leasing reforms like increasing the onshore royalty, the rental rates and the minimum bid in lease auctions remained in the draft bill. These fiscal reforms will bring in revenues and protect taxpayers from future liabilities associated with oil and gas drilling.

Here’s the list of reforms included in the current draft:

• Raise the onshore oil and gas royalty rates for all leases issued on or after Jan 1, 2024 [Learn more about how taxpayers have been shortchanged by the below-market-rate royalty for onshore oil and gas here.]
  • from 12.5% to 16.67%
  • increase rate on back royalties and reinstated leases from 16 2/3% to 20%

• Charge royalties on all extracted methane from federal lands and Outer Continental Shelf that is consumed or lost by venting or flaring except for [Learn more about lost gasses through venting and flaring here.]
  • gas that is vented or flared in an emergency for not more than 48 hours
  • gas that is used for the benefit of the lease (beneficial use)
  • gas that is unavoidably lost
• Increase oil and gas minimum bid from $2/acre to $10/acre
• Raise oil and gas rental rates [Learn more about how raising oil and gas rental rates will increase revenues here.]
  • $3/acre for the first 2 years; $5/acre for year 3-8; then no less than $10/acre for year 9-10
  • back rentals and rent for reinstated leases increased to $20/acre from $10/acre
• Establish an expression of interest fee
  • $5/acre, to be adjusted every 4 years to reflect inflation
• Eliminate noncompetitive oil and gas leasing [Learn more here about how noncompetitive leasing often leads to speculation but not production, locking lands away from other beneficial uses.]
  • Lands that receive no bids may be made available for a new round of competitive bidding
• Repeal of the Arctic National Wildlife Refuge oil and gas program [Learn more about fiscal concerns with leasing in ANWR here.]
• Update onshore bonding requirement [Learn more about how taxpayers are at risk for oil and gas industry liabilities due to insufficient bonding here.]
  • Individual lease bond minimum: $150k
  • Statewide bond minimum: $500k
  • Nationwide bond minimum: $2 million
  • Adjust for inflation every 4 years
• Impose new severance fee for both onshore and offshore leases
  • $0.5 per barrel of oil produced and $$0.025 per thousand cubic feet of gas produced
  • Deposit into the Energy Community Revitalization Fund
    • Available only during the 5-fiscal-year period following the fiscal year the fee is deposited
    • Use of fund: Department of the Interior to inspect, inventory, assess, decommission, reclaim abandoned hardrock mines, orphaned oil and gas wells, etc.