‘Inflation Reduction’ Rule Hikes Domestic Oil, Gas Production Costs

TL/DR –

The Biden Administration has finalized a rule as part of the “Inflation Reduction Act” that will significantly increase the cost of producing oil and gas in the US. The rule includes a raised royalty rate, causing an increase of $1.8 billion for oil and gas companies by 2023, and also imposes higher fees and royalties, dramatically raises bonding requirements, and severely limits the number of parcels offered at lease sales. Critics argue that this rule will devastate domestic energy production, cost US jobs, increase dependence on foreign energy, and ironically, increase inflation.

Biden Administration Finalizes New Rule Amplifying Oil and Gas Production Costs in the U.S.

The U.S. Biden Administration declared a finalized rule on Friday, significantly inflating the cost of oil and gas production in the country. This rule is an enactment of the Democrats’ “Inflation Reduction Act.”

The Department of Interior clarified in a press statement, “The rule ratifies the fiscal provisions incorporated in the Inflation Reduction Act.”

Impact on Oil and Gas Companies

As reported by FOX8 WGHP, the rule enforces some already active provisions in the climate law—Inflation Reduction Act, leading to an augmented royalty rate costing oil and gas companies around $1.8 billion by 2023.

Critiques and Reactions

The Hill reported a quick response from energy advocates, highlighting the irony of an ‘inflation reduction’ act elevating energy costs.

“Increasing costs amidst soaring inflation doesn’t begin to describe Joe Biden and his administration” said Daniel Turner, Founder and Executive Director for Power The Future.

“This announcement is the result of the incorrectly named Inflation Reduction Act, yet Biden perceives increased costs are the solution to inflation.”

Concerns Raised by U.S. Senator

U.S. Senator John Barrasso (R-WY), a key member of the Senate Committee on Energy and Natural Resources, expressed his concerns that this rule imposes higher fees and royalties, dramatically escalates bonding requirements, and severely limits the number of parcels offered at lease sales.

Implications of the Rule

The rule could potentially harm domestic energy production, risk U.S. jobs, and increase American dependence on foreign energy, according to Barrasso. The price increases on oil and gas producers include:

• Bond requirement increase by 1,400 percent – from $10,000 to $150,000 per lease on federally-owned land.
• Royalty rate for energy produced on public lands raised from 12.5% to 16.67%.
• Initial annual rent rates doubled from $1.50 per acre to $3 per acre, and raised to $15 per acre in later years.
• Minimum bid to lease lands for drilling quintupled from $2 per acre to $10 per acre and adjusted for inflation.

—
Read More US Economic News