The American Petroleum Institute and others are sounding the alarm about hidden provisions in the Democrats’ massive infrastructure bill. The $3.5 trillion bill includes a great deal of spending that has nothing to do with infrastructure, and. according to the API, it also includes pernicious attacks on U.S. energy producers. That’s included in the bill’s latest mark-up.
The energy-related provisions take direct aim at production on federal leases, which Biden already paused via executive order, but then lost on when several states took him to court. The provisions in the so-called infrastructure bill go far beyond even what Biden’s lease pause sought to accomplish, attacking the very viability of producing energy on federal lands.
API has detailed the full-spectrum attack on U.S. energy producers in an email it is sending to its subscribers. PJ Media obtained the email Tuesday evening.
- Disincentivizing Federal Lease Bidding
- 500% Minimum Bid Increase: Would raise onshore minimum lease bid from $2/acre to $10/acre. By BLM office 2020 sales, 11% of leases sold in New Mexico were below $10/acre; 78% in Colorado; and 30% in North Dakota.
- Cuts Time to Produce in Half: Would reduce the primary term for new onshore leases from 10 years to 5 years, even though a significant percentage of leases require more than 5 years to start producing. For example, recent data shows that 37% of leases in New Mexico started production more than 5 years after authorization.
- More Than Doubles Annual Rent: Would raise annual rental rates to $3/acre for the first 2 years, and then $5/acre, increasing costs by at least $123 million per year.
- Eliminates Possibility of Royalty Relief: Would eliminate authority to grant royalty relief in difficult times or national emergency.
- Imposes New Inspection Fee: Would raise the minimum inspection fees each operator will pay annually to anywhere from $800-$11,300 per lease, varying by lease.
- Imposing Huge New Costs on Production
- Increased Royalty Rates: Would raise onshore royalty rate floor by more than half from 12.5% to 20% on new leases and would raise the already high offshore royalty rate floor to 20%.
- New Royalties on Venting/Flaring: Would require royalties to be paid on all gas produced, including gas used or consumed for the benefit of the lease such as gathering compressors and gas that is consumed or lost by venting, flaring, or fugitive releases, with limited exceptions, which would raise royalty payments on average by 6.5%.
- 1500-2000% Bonding Increase: Would increase onshore federal lease bond minimum by 15X for a federal lease bond, by 20X for a statewide bond, and removes the nationwide bond option. Additionally, it calls for rulemaking that will require bonding to cover 100% of the reclamation costs of a lease on federal lands that have less than 0.05% of federal wells orphaned.
- New Expression of Interest Fee: Would impose a minimum $15/acre to notify the government of public interest in leasing. Onshore leases can be as large as 2,560 acres, thus costing up to $38,400/lease.
- New “Resource” Fee: Would impose a $4/acre annual fee on producing leases, thus costing up to $10,240/lease for onshore leases, and $23,040/lease for offshore leases.
- New Leasing Fee: Would impose a $6/acre annual fee on non-producing leases, thus costing up to $15,360 for each onshore lease, and $34,560 for each offshore lease.
- New Severance Tax Fee: Would impose a new annual, non-refundable Federal severance fee “tax” on every barrel of oil equivalent produced from new leases on federal lands and waters.
- New Idled Wells Fee: Would impose an annual cost anywhere from $500-$7,500 per idled well per year, and would deem a well “nonoperational” after 2 years, down from 7 years.
- Excluding Huge Areas of Rich Natural Resources:Several measures would severely limit access to federal natural gas and oil development – including terminating some existing leases – in Alaska (ANWR/NPRA) and the Gulf of Mexico (Eastern Planning Area), which would hurt local communities that use this royalty revenue for conservation, education, and infrastructure.
- Increasing Pipeline Transportation Costs:Would impose a new $10,000/mile annual fee for water depths greater than 500 ft.; and $1,000/mile for water depths less than 500 ft. There are approximately 26 thousand miles of pipelines in the offshore with about 12.6k miles in waters less than 400 ft and 13.7k miles in waters greater than 400 ft. Increased annual costs would total ~$149 million.
None of that has anything to do with improving infrastructure. The pipeline provision actively hurts pipelines, which remain the safest and environmentally cleanest way to transport energy from the source to where it’s refined and used. That provision alone would directly harm the environment. The whole suite of fees and exclusions would make energy more expensive to produce in the United States, ending what’s left of the energy independence the country achieved during the previous administration.
If enacted, the measures would codify much of the stupefyingly radical and expensive Green New Deal into law. Though the radical Democrats claim all of the above would be done in the name of helping the environment, it would actually end up hurting the environment. The provisions in the bill do nothing to curb energy demand, and should the economy overcome Biden’s other anti-jobs policies, the recovering economy will demand more energy than the U.S. consumed overall in 2020. With more energy demand but domestic suppliers strangled, the U.S. will be forced to resume buying more energy from overseas sources. Those sources do not produce energy as cleanly as U.S. producers. They are also less stable politically. Additionally, some electric generators that currently burn clean natural gas produced in the U.S. will find themselves forced to revert to burning coal. Coal is a dirtier power source than natural gas. In fact, the market-driven switch to natural gas away from coal over the past several years led to the U.S. reducing emissions ahead of the Paris targets despite (?) President Trump withdrawing the U.S. from that agreement when he was in office.
No Republicans support the infrastructure bill, which the Democrats are attempting to pass via reconciliation without a single Republican vote. Moderate Democrats are being urged to vote no and some, including Sen. Joe Manchin, are signaling that the bill includes too much spending for them to support.