"Oil well in Rangely, Colorado" by Jeffrey Beall is licensed under CC BY 4.0. https://commons.wikimedia.org/wiki/File:Oil_well_in_Rangely,_Colorado.JPG

As a result of President Biden’s executive order on “Tackling the Climate Crisis at Home and Abroad,” a new Interior Department report made the unprecedented recommendation of raising royalty rates for oil and gas leases on federal lands. This comes despite soaring inflation and persistently high gas prices, both of which would be exasperated by an increase in federal royalty rates. 

For the past 100 years, the Mineral Leasing Act has set a 12.5 percent minimum rate for competitive oil and gas leases on federal lands. Typical of the administration’s big government mindset, the report called the rate “outdated” because the federal government could have made about $12.4 billion more between 2010 and 2019 had the rates been higher. 

Strangely, the report also cites findings from the Interior Department’s Office of Inspector general that, “many of DOI’s energy programs are vulnerable to waste, fraud, and mismanagement” as a reason to increase royalty rates. Only in the Biden administration could corruption and incompetence be seen as a reason to give the government more money. 

The unprecedented rate hike would come at the worst possible time for consumers, as it would raise fuel and electricity prices even further as producers grapple with increased production costs. The national averageprice for a gallon of gasoline was $3.40 last week, up from $2.22 a year ago. Natural gas prices have seen an even bigger jump, increasing from $2.39 per million Btu in October of last year to an average $5.51 this past October.

Federal lands are responsible for about seven percent of all domestic oil production and eight percent of natural gas production. Federal waters account for an additional 16 percent of oil and 3 percent of natural gas production. Raising royalty rates on oil and gas producers operating on federal jurisdictions would thus significantly and detrimentally impact the American drilling industry. 

The report highlights the clash between President Biden’s progressive climate agenda and his recent efforts to ease the economic burdens plaguing American consumers. The U.S. last week began releasing 50 million barrels of oil from government stockpiles in an effort to make gasoline more affordable, though the effort has seen little success thus far.

If the Biden administration truly wants to ease the financial burden facing consumers, then it will reject the misguided rate hike proposed by the Interior Department and instead pursue pro-growth policies that promote, rather than attack, the American energy industry.