Interior’s oil plan is coming. Here’s what to watch.

By Heather Richards | 05/24/2023 07:22 AM EDT

A draft of the Interior Department’s rules is expected to come out by next month and could help determine how President Joe Biden’s climate agenda affects public lands.

President Joe Biden and a pump jack.

Susan Walsh/AP Photo (Biden); David Zalubowski/AP Photo (pump jack)

Biden administration officials in recent weeks hosted private listening sessions with environmental groups and oil companies ahead of the release of proposed oil and gas regulations that could represent some of the White House’s most lasting steps on public lands to help address climate change.

Major oil companies like Exxon Mobil Corp., as well as influential environmental groups like the Sierra Club, met with Interior Department and White House officials, according to the administration’s regulatory agenda, in efforts to shape the long-anticipated draft regulations on bonding, fees and other economic aspects of drilling on public land.

Originally planned for release in 2022, the rules were heavily influenced by the Inflation Reduction Act, last year’s climate law that included new floors for bonding and royalties. A draft of the Interior Department’s rules is expected to come out by next month, according to recent testimony in a federal court case from Nada Culver, deputy director of policy and programs at the Bureau of Land Management.


A key question is whether Interior will use the regulations as a vehicle for more aggressive climate reforms. Over the objections of the oil and gas industry, some green groups are urging the White House to do more than what was laid out in the Inflation Reduction Act to limit the oil industry’s reach on federal land.

When it comes to public lands, the White House so far hasn’t taken the step that President Joe Biden promised on the 2020 campaign trail: retire the federal oil and gas program. Instead, the Interior Department has so far adopted a more gradual approach with less leasing, more climate accounting and steeper costs for drillers. This approach was made more lasting when codified into law by the Inflation Reduction Act.

During several meetings in late April and early May, environmental and climate organizations were explicit in their requests that the administration embrace more progressive reforms, according to documents submitted to the Office of Information and Regulatory Affairs. They want the White House to consider climate-impact screening to any new leasing decisions and explore simply phasing out oil and gas over a period of years.

The Interior Department declined to comment for this story.

Earthjustice lawyer Michael Freeman, who attended a call with Interior officials earlier this month that explored some of these ideas, said the administration has an opportunity to make good on the president’s climate commitments in a concrete way.

“The federal government itself is this country’s single largest source of fossil fuels,” he said. “The oil and gas rule is a prime opportunity for BLM to address our climate goals and bring the federal program into alignment with what we’re trying to do as a nation.”

Oil interests have meanwhile bemoaned the constant call to phase out oil and gas, and are bracing for potentially more onerous rules.

In a call held earlier this month, requested by the American Petroleum Institute, a host of Interior officials heard from the lobbying group and representatives from some of the world’s largest oil and gas companies, including American supermajors Chevron Corp. and Exxon Mobil. Neither oil firm provided comment for this story.

Documents shared by industry at that meeting spelled out how far the Biden administration’s leasing has dropped off compared to both the Trump and Obama administrations, and highlighted the tangle of interim rules BLM inked in recent months that have frustrated industry.

Western Energy Alliance President Kathleen Sgamma, who was not present during those calls, said the White House’s strategy has been to make drilling more difficult. That is also the approach they expect to see in the draft regulations.

“We’re not expecting anything good,” she said.

IRA gets taken up by BLM

Some of the likely oil and gas rules that will be floated by Interior’s Bureau of Land Management will be familiar from the Inflation Reduction Act.

As well as billions in clean energy incentives, the Inflation Reduction Act included a suite of economic changes for the oil and gas program that reflected years of lobbying efforts by environmental groups. One key example was setting a new minimum royalty of nearly 17 percent on federal leases.

The law also updated fees and rental rates, which will likely be codified in the BLM rules.

Not yet taken up, however, is a long-term ask from environmentalists for the Interior Department to overhaul bonding, which is how much money oil companies have to secure for cleanup costs before they are allowed to drill. Bonding is meant to curb the occurrence of orphaned oil wells that can leak methane and pose environmental hazards, by ensuring there is available money to clean up wells abandoned by oil companies.

Shannon Anderson, a lawyer for the Wyoming conservation group Powder River Basin Resource Council, said her members are hoping the new regulations take an aggressive stance on bonding by eliminating so-called blanket bonds, where companies can lay down a flat fee to cover all their wells in a state.

“The goal is to make industry pay its own way,” she said. Her group has a meeting with Biden and Interior officials Tuesday.

A push for climate

Some groups are also advocating for Interior to take bolder steps to address climate change.

An analysis shared with White House officials during a May 2 call with Natural Resources Defense Council, Earthjustice, Sierra Club and the National Parks Conservation Association, demonstrated that cutting oil and gas on public lands and waters will help reach a national target of slashing emissions by 50 percent economywide by 2030 compared to 2005 levels. The Inflation Reduction Act, by some estimates, would drive as much as a 40 percent emissions reduction, thanks to policies such as boosting electrification and clean energy.

Cutting oil and gas production on public lands in half by 2030 would help fill the remaining gap, leaving the U.S. just 7 to 11 percent short of its goal, according to the group’s estimates.

Another submission to the administration laid out a potential climate screening that could be used to weigh lands before they are leased for oil and gas in a nod to the limited amount of oil and gas that can be developed while staying within climate targets. Yet another proposal reiterated a petition from a host of environmental groups, including the Center for Biological Diversity, to simply phase out oil and gas on public lands.

This push to focus on climate goals is partly rooted in how the Biden administration itself described the rule in its unified agenda — a schedule of anticipated regulations that’s updated several times a year. It said the rule would “update the BLM’s process for leasing to ensure the protection and proper stewardship of the public lands, including potential climate and other impacts associated with fossil fuel activities.”

“The key thing is what they do with climate,” said Earthjustice’s Freeman.

On the other hand, it’s not clear that the Biden administration’s appetite for charting the end of the federal oil and gas program is still in place, several environmentalists acknowledged.

The White House came under fire from conservatives and oil and gas companies after it instituted a leasing moratorium in early 2021. That criticism heated up in the following months when oil prices soared internationally, and the administration defended itself from Republican attacks, in part, by urging drillers to drill more to bring down prices.

The administration’s efforts have since bent toward reform, compromise and indirect attempts to offset energy’s prominence on federal lands, such as with a proposed rule BLM released in March that would give conservation the same priority on public land as energy development, recreation and grazing.

As written, the rule would grant private groups the ability to lease public lands for restoration, much as energy companies have historically bought up land rights for development. It’s an attractive prospect to many environmentalists, but industry has already argued the proposal would effectively give greens a path to exclude drilling on public lands and questioned the legality of the proposal.

Mark Squillace, a professor at the University of Colorado Law School and a former Interior official during the Clinton administration, said the department is likely to ink this draft rule with the Inflation Reduction Act reforms first in mind.

He said BLM also needs to address uncertainties sparked by the law, such as whether BLM is required to offer land for sale after an oil prospector has paid for that nomination.

But Squillace, too, argued that Inflation Reduction Act reforms stop short of a necessary, “managed” retirement of the federal oil program that could fall under this regulation’s purview.

“If not here, then when?” he asked.

Red flags for oil and gas

With reform efforts at a zenith due to the Biden administration’s strong interest in climate actions, oil and gas companies are closely watching Interior’s moves.

During the industry listening session with White House on May 8, requested by the American Petroleum Institute, industry shared a screenshot from a remote BLM training session last year to demonstrate how a host of new instructional memoranda (IM) add up to a bureaucratic tangle.

One IM instituted a public interest review before oil and gas leases that have been revoked are reinstated. Another adds such a review to drilling permits that a company wants to renew. Another pair of IMs identified how BLM approaches areas that can be offered for lease and narrowing in on areas with a high priority in favor of oil and gas leasing.

The meeting with Interior on the new oil regs was requested by API’s senior director of federal relations, Jack Cramton, and was attended by API’s Andrew Baxter, an economic adviser and Amy Emmert, a policy adviser. Other industry representatives on the teleconference included Brett Barrus, Chevron’s upstream legislative and regulatory affairs lead, and Jennifer Bradfute with Exxon Mobil, among others.

Scott Lauermann, a spokesperson for API, did not respond to questions about the meeting with Biden officials. Lauermann said the group “regularly engages with a broad range of stakeholders on the critical role U.S. natural gas and oil can play in strengthening energy security while meeting demand for affordable, reliable energy.”

Sgamma, with Western Energy Alliance, was critical of the Biden administration’s many memoranda, which she said reverses longstanding practice of “rubber stamping” some paperwork for previously vetted oil and gas activity. She also took aim at environmental groups’ idea to add a new climate screening to leasing decisions, something she says is covered under existing environmental reviews for both leasing and permitting.

“They can’t just stop oil and gas,” she said of leadership at Interior and BLM. “What they are doing is making it more and more difficult.”