The Inflation Reduction Act of 2022 introduced significant and unfavorable changes to federal oil and gas leasing processes. This proposal aims to repeal specific modifications to restore previous leasing practices, promote domestic energy production, and reduce financial burdens on oil and gas operators.
- Royalty Rate Reduction
We propose repealing the IRA’s increase in the federal royalty rate for new competitive oil and gas leases. The royalty rate should be returned to the previous 12.5% minimum set by the Mineral Leasing Act, down from the IRA-mandated 16.67%. This reduction would:
- Encourage more competitive bidding in lease sales
- Lead to increased domestic production and attract investors
- Remove Expression of Interest (EOI) Filing Fee
We propose eliminating the $5 p/acre filing fee for Expressions of Interest introduced by the IRA. Removing this fee would:
- Encourage more nominations for potential lease parcels
- Reduce barriers to entry for smaller operators
- Potentially lead to the identification of more productive areas for leasing
- Repeal Increased Annual Rental Payments
We propose repealing the IRA’s increases in annual rental payments for federal oil and gas leases. Specifically, we recommend: Returning to the previous rental rate structure of $1.50 per acre for the first five years and $2 per acre thereafter. Eliminating the escalating rental rate structure introduced by the IRA ($3 per acre for the first two years, $5 per acre for years 3-8, and $15 per acre thereafter)
This repeal would:
- Reduce financial burdens on lease holders, especially for non-producing leases
- Encourage companies to maintain leases for potential future development
- Potentially increase industry interest in federal lease sales
- Repeal Changes in Bonding Requirements
We propose repealing the IRA’s increases in bonding requirements for federal oil and gas leases. Specifically, we recommend:
- Returning to the previous minimum lease bond amount of $10,000, instead of the IRA’s $150,000
- Reinstating the previous minimum statewide bond of $25,000, rather than the IRA’s $500,000
- Reestablishing nationwide and unit bonds, which were eliminated by the IRA
This repeal would:
- Reduce upfront costs for operators, particularly smaller companies
- Maintain flexibility in bonding options for multi-state operators
- Encourage more participation in federal lease sales
- Restore Previous Minimum Bid Requirements
We propose repealing the IRA’s increase in minimum bids for lease auctions. Specifically: Return the minimum bid to $2 per acre, down from the IRA-mandated $10 per acre. This change would:
- Lower the entry barrier for new and smaller operators
- Increase competition in lease sales
- More federal acreage being leased and developed
By repealing these specific IRA modifications to federal oil and gas leasing, this proposal aims to reinvigorate domestic energy production, create jobs in the energy sector, and promote energy security. It would restore many of the pre-IRA leasing practices that the oil and gas industry had operated under for years, leading to increased investment and development opportunities on federal lands.