Inflation Reduction Act Fossil Fuel Provisions

Some thoughts:

• The Department of the Interior and the U.S. Government Accountability Office have contemplated many of these changes for years
• As noted by the GAO in the report linked above, 74% of DOI oil & gas revenue comes from competitive lease sales with bonus bids above $100/acre.  Bumping minimum bids from $2 to $10/acre will have little impact on U.S. oil production, in our opinion.
• Further, the BLM has complained that they have been bogged down by speculators leasing land - often in noncompetitive lease sales - that have no intention of drilling or producing oil & gas; some of these changes are addressing those concerns.
• The oil & gas industry will not like being required to pay royalties on all methane, but why should taxpayer resources be flared or vented?
• The oil & gas industry received a 'win' with required offshore lease sales and the tying of wind and solar activity on federal leases to concurrent oil & gas lease sales.
• As we've noted in the past, the vast majority of U.S. oil production - roughly 75% - comes from private and state lands

• Department of Interior data on Federal oil production has a lag, with the most recent data as of March 2022.  But to drive home the point that Federal leasing and production isn't materially holding back total U.S. oil production we would note Federal onshore oil production growth rates (year-over-year) have exceeded private land growth rates for 66 consecutive months (Sept. 2016). (1)

(1) EIA data is used for total U.S. oil production, from which DOI data for Federal onshore, offshore and native land oil production is backed out to calculated private and state land oil production.

PART 6—FOSSIL FUEL RESOURCES

SEC. 50261. OFFSHORE OIL AND GAS ROYALTY RATE.

Section 8(a)(1) of the Outer Continental Shelf Lands Act (43 U.S.C. 1337(a)(1)) is amended—

(1) in each of subparagraphs (A) and (C), by striking ‘‘not less than 12 1 ⁄2 per centum’’ each place it appears and inserting ‘‘not less than 16 2 ⁄3 percent, but not more than 18 3 ⁄4 percent, during the 10-year period beginning on the date of enactment of the Act titled ‘An Act to provide for reconciliation pursuant to title II of S. Con. Res. 14’, and not less than 16 2/3 percent thereafter,’’;

(2) in subparagraph (F), by striking ‘‘no less than 12 1 ⁄2 per centum’’ and inserting ‘‘not less than 16 2⁄3 percent, but not more than 18 3 ⁄4 percent, during the 10-year period beginning on the date of enactment of the Act titled ‘An Act to provide for reconciliation pursuant to title II of S. Con. Res. 14’, and not less than 16 2 ⁄3 percent thereafter,’’; and

(3) in subparagraph (H), by striking ‘‘no less than 12 and 1 ⁄2 per centum’’ and inserting ‘‘not less than 16 2⁄3 percent, but not more than 18 3 ⁄4 percent, during the 10-year period beginning on the date of enactment of the Act titled ‘An Act to provide for reconciliation pursuant to title II of S. Con. Res. 14’, and not less than 16 2 ⁄3 percent thereafter,’’.

SEC. 50262. MINERAL LEASING ACT MODERNIZATION.

(a) ONSHORE OIL AND GAS ROYALTY RATES.—

(1) LEASE OF OIL AND GAS LAND.—Section 17 of the Mineral Leasing Act (30 U.S.C. 226) is amended—

(A) in subsection (b)(1)(A), in the fifth sentence—

(i) by striking ‘‘12.5’’ and inserting ‘‘16 2 ⁄3’’; and

(ii) by inserting ‘‘or, in the case of a lease issued during the 10-year period beginning on the date of enactment of the Act titled ‘An Act to provide for reconciliation pursuant to title II of S. Con. Res. 14’, 16 2 ⁄3 percent in amount or value of the production removed or sold from the lease’’ before the period at the end; and

(B) by striking ‘‘12 1 ⁄2 per centum’’ each place it appears and inserting ‘‘16 2 ⁄3 percent’’.

(2) CONDITIONS FOR REINSTATEMENT.—Section 31(e)(3) of the Mineral Leasing Act (30 U.S.C. 188(e)(3)) is amended by striking ‘‘16 2 ⁄3’’ each place it appears and inserting ‘‘20’’.

(b) OIL AND GAS MINIMUM BID.—Section 17(b) of the Mineral Leasing Act (30 U.S.C. 226(b)) is amended—

(1) in paragraph (1)(B), in the first sentence, by striking ‘‘$2 per acre for a period of 2 years from the date of enactment of the Federal Onshore Oil and Gas Leasing Reform Act of 1987.’’ and inserting ‘‘$10 per acre during the 10-year period beginning on the date of enactment of the Act titled ‘An Act to provide for reconciliation pursuant to title II of S. Con. Res. 14’.’’; and

(2) in paragraph (2)(C), by striking ‘‘$2 per 2 acre’’ and inserting ‘‘$10 per acre’’.

(c) FOSSIL FUEL RENTAL RATES.—

(1) ANNUAL RENTALS.—Section 17(d) of the Mineral Leasing Act (30 U.S.C. 226(d)) is amended, in the first sentence, by striking ‘‘$1.50 per acre’’ and all that follows through the period at the end and inserting ‘‘$3 per acre per year during the 2-year period beginning on the date the lease begins for new 10 leases, and after the end of that 2-year period, $5 per acre per year for the following 6-year period, and not less than $15 per acre per year thereafter, or, in the case of a lease issued during the 10-year period beginning on the date of enactment of the Act titled ‘An Act to provide for reconciliation pursuant to title II of S. Con. Res. 14’, $3 per acre per year during the 2-year period beginning on the date the lease begins, and after the end of that 2-year period, $5 per acre per year for the following 6-year period, and $15 per acre per year thereafter.’’.

(2) RENTALS IN REINSTATED LEASES.—Section 31(e)(2) of the Mineral Leasing Act (30 U.S.C. 188(e)(2)) is amended by striking ‘‘$10’’ and inserting ‘‘$20’’.

(d) EXPRESSION OF INTEREST FEE.—Section 17 of the Mineral Leasing Act (30 U.S.C. 226) is amended by adding at the end the following:

‘‘(q) FEE FOR EXPRESSION OF INTEREST.—

‘‘(1) IN GENERAL.—The Secretary shall assess a nonrefundable fee against any person that, in accordance with procedures established by the Secretary to carry out this subsection, submits an expression of interest in leasing land available for disposition under this section for exploration for, and development of, oil or gas.

‘‘(2) AMOUNT OF FEE.—

‘‘(A) IN GENERAL.—Subject to subparagraph (B), the fee assessed under paragraph (1) shall be $5 per acre of the area covered by the applicable expression of interest.

‘‘(B) ADJUSTMENT OF FEE.—The Secretary shall, by regulation, not less frequently than every 4 years, adjust the amount of the fee under subparagraph (A) to reflect the change in inflation.’’.

(e) ELIMINATION OF NONCOMPETITIVE LEASING.—

(1) IN GENERAL.—Section 17 of the Mineral Leasing Act (30 U.S.C. 226) is amended—

(A) in subsection (b)—

(i) in paragraph (1)(A)—

(I) in the first sentence, by striking ‘‘paragraphs (2) and (3) of this subsection’’ and inserting ‘‘paragraph (2)’’; and

(II) by striking the last sentence; and

(ii) by striking paragraph (3);

(B) by striking subsection (c) and inserting the following:

‘‘(c) ADDITIONAL ROUNDS OF COMPETITIVE BIDDING.—Land made   available for leasing under subsection (b)(1) for which no bid is accepted or received, or the land for which a lease terminates, expires, is cancelled, or is relinquished, may be made available by the Secretary of the Interior for a new round of competitive bidding under that subsection.’’; and

(C) by striking subsection (e) and inserting the following:

‘‘(e) TERM OF LEASE.—

‘‘(1) IN GENERAL.—Any lease issued under this section, including a lease for tar sand areas, shall be for a primary term of 10 years.

‘‘(2) CONTINUATION OF LEASE.—A lease described in paragraph (1) shall continue after the primary term of the lease for any period during which oil or gas is produced in paying quantities.

‘‘(3) ADDITIONAL EXTENSIONS.—Any lease issued under this section for land on which, or for which under an approved cooperative or unit plan of development or operation, actual drilling operations were commenced and diligently prosecuted prior to the end of the primary term of the lease shall be extended for 2 years and for any period thereafter during which oil or gas is produced in paying quantities.’’.

(2) CONFORMING AMENDMENTS.—Section 31 of the Mineral Leasing Act (30 U.S.C. 188) is amended—

(A) in subsection (d)(1), in the first sentence, by striking ‘‘or section 17(c) of this Act’’;

(B) in subsection (e)—

(i) in paragraph (2)—

(I) by striking ‘‘either’’; and

(II) by striking ‘‘or the inclusion’’ and all that follows through ‘‘, all’’; and

(ii) in paragraph (3)—

(I) in subparagraph (A), by adding ‘‘and’’ after the semicolon;

(II) by striking subparagraph (B); and

(III) by striking ‘‘(3)(A) payment’’ and inserting the following:

‘‘(3) payment’’;

(C) in subsection (g)—

(i) in paragraph (1), by striking ‘‘as a competitive’’ and all that follows through ‘‘of this Act’’ and inserting ‘‘in the same manner as the original lease issued pursuant to section 17’’;

(ii) by striking paragraph (2);

(iii) by redesignating paragraphs (3) and (4) as paragraphs (2) and (3), respectively; and

(iv) in paragraph (2) (as so redesignated), by striking ‘‘applicable to leases issued under subsection 17(c) of this Act (30 19 U.S.C. 226(c)) except,’’ and inserting ‘‘except’’;

(D) in subsection (h), by striking ‘‘subsections (d) and (f) of this section’’ and inserting ‘‘subsection (d)’’;

(E) in subsection (i), by striking ‘‘(i)(1) In acting’’ and all that follows through ‘‘of this section’’ in paragraph (2) and inserting the following:

‘‘(i) ROYALTY REDUCTION IN REINSTATED LEASES.—In acting on a petition for reinstatement pursuant to subsection (d)’’;

(F) by striking subsection (f); and

(G) by redesignating subsections (g) through (j) as subsections (f) through (i), respectively.

SEC. 50263. ROYALTIES ON ALL EXTRACTED METHANE.

(a) IN GENERAL.—For all leases issued after the date of enactment of this Act, except as provided in subsection (b), royalties paid for gas produced from Federal land and on the outer Continental Shelf shall be assessed on all gas produced, including all gas that is consumed or lost by venting, flaring, or negligent releases through any equipment during upstream operations.

(b) EXCEPTION.—Subsection (a) shall not apply with respect to—

(1) gas vented or flared for not longer than 48 hours in an emergency situation that poses a danger to human health, safety, or the environment;

(2) gas used or consumed within the area of the lease, unit, or communitized area for the benefit of the lease, unit, or communitized area; or

(3) gas that is unavoidably lost.

SEC. 50264. LEASE SALES UNDER THE 2017–2022 OUTER CONTINENTAL SHELF LEASING PROGRAM.

(a) DEFINITIONS.—In this section:

(1) LEASE SALE 257.—The term ‘‘Lease Sale 257’’ means the lease sale numbered 257 that was approved in the Record of Decision described in the notice of availability of a record of decision issued on 9 August 31, 2021, entitled ‘‘Gulf of Mexico, Outer Continental Shelf (OCS), Oil and Gas Lease Sale 257’’ (86 Fed. Reg. 50160 (September 7, 2021)), and is the subject of the final notice of sale entitled ‘‘Gulf of Mexico Outer Continental Shelf Oil and Gas Lease Sale 257’’ (86 Fed. Reg. 54728 (October 4, 2021)).

(2) LEASE SALE 258.—The term ‘‘Lease Sale 258’’ means the lease sale numbered described in the 2017–2022 Outer Continental Shelf Oil and Gas Leasing Proposed Final Program published on November 18, 2016, and approved by the Secretary in the Record of Decision issued on January 17, 2017, described in the notice of availability entitled ‘‘Record of Decision for the 2017–2022 Outer Continental Shelf Oil and Gas Leasing Program Final Programmatic Environmental Impact Statement; MMAA104000’’ (82 Fed. Reg. 6643 (January 19, 2 2017)).

(3) LEASE SALE 259.—The term ‘‘Lease Sale 259’’ means the lease sale numbered 259 described in the 2017–2022 Outer Continental Shelf Oil and Gas Leasing Proposed Final Program published on November 18, 2016, and approved by the Secretary in the Record of Decision issued on January 17, 2017, described in the notice of availability entitled ‘‘Record of Decision for the 2017–2022 Outer Continental Shelf Oil and Gas Leasing Program Final Programmatic Environmental Impact Statement; MMAA104000’’ (82 Fed. Reg. 6643 (January 19, 14 2017)).

(4) LEASE SALE 261.—The term ‘‘Lease Sale 261’’ means the lease sale numbered 261 described in the 2017–2022 Outer Continental Shelf Oil and Gas Leasing Proposed Final Program published on November 18, 2016, and approved by the Secretary in the Record of Decision issued on January 17, 2017, described in the notice of availability entitled ‘‘Record of Decision for the 2017–2022 Outer Continental Shelf Oil and Gas Leasing Program Final Programmatic Environmental Impact Statement; MMAA104000’’ (82 Fed. Reg. 6643 (January 19, 2 2017)).

(b) LEASE SALE 257 REINSTATEMENT.—

(1) ACCEPTANCE OF BIDS.—Not later 30 days after the date of enactment of this Act, the Secretary shall, without modification or delay—

(A) accept the highest valid bid for each tract or bidding unit of Lease Sale 257 for which a valid bid was received on November 17, 2021; and

(B) provide the appropriate lease form to the winning bidder to execute and return.

(2) LEASE ISSUANCE.—On receipt of an executed lease form under paragraph (1)(B) and payment of the rental for the first year, the balance of the bonus bid (unless deferred), and any required bond or security from the high bidder, the Secretary shall promptly issue to the high bidder a fully executed lease, in accordance with—

(A) the regulations in effect on the date of Lease Sale 257; and

(B) the terms and conditions of the final notice of sale entitled ‘‘Gulf of Mexico Outer Continental Shelf Oil and Gas Lease Sale 257’’ (86 Fed. Reg. 54728 (October 4, 2021)).

(c) REQUIREMENT FOR LEASE SALE 258.—Notwithstanding the expiration of the 2017–2022 leasing program, not later than December 31, 2022, the Secretary shall conduct Lease Sale 258 in accordance with the Record of Decision approved by the Secretary on January 17, 2017, described in the notice of availability entitled ‘‘Record of Decision for the 2017–2022 Outer Continental Shelf Oil and Gas Leasing Program Final Programmatic Environmental Impact Statement; MMAA104000’’ issued on January 17, 10 2017 (82 Fed. Reg. 6643 (January 19, 2017)).

(d) REQUIREMENT FOR LEASE SALE 259.—Notwithstanding the expiration of the 2017–2022 leasing program, not later than March 31, 2023, the Secretary shall conduct Lease Sale 259 in accordance with the Record of Decision approved by the Secretary on January 17, 2017, described in the notice of availability entitled ‘‘Record of Decision for the 2017–2022 Outer Continental Shelf Oil and Gas Leasing Program Final Programmatic Environmental Impact Statement; MMAA104000’’ issued on January 17, 2017 (82 Fed. Reg. 6643 (January 19, 2017)).

(e) REQUIREMENT FOR LEASE SALE 261.—Notwithstanding the expiration of the 2017–2022 leasing program, not later than September 30, 2023, the Secretary shall conduct Lease Sale 261 in accordance with the Record of Decision approved by the Secretary on January 17, 2017, described in the notice of availability entitled ‘‘Record of Decision for the 2017–2022 Outer Continental Shelf Oil and Gas Leasing Program Final Programmatic Environmental Impact Statement; MMAA104000’’ issued on January 17, 2017 (82 Fed. Reg. 6643 (January 19, 2017)).

SEC. 50265. ENSURING ENERGY SECURITY.

(a) DEFINITIONS.—In this section:

(1) FEDERAL LAND.—The term ‘‘Federal land’’ means public lands (as defined in section 103 of the Federal Land Policy and Management Act of 1976 (43 U.S.C. 1702)).

(2) OFFSHORE LEASE SALE.—The term ‘‘offshore lease sale’’ means an oil and gas lease sale—

(A) that is held by the Secretary in accordance with the Outer Continental Shelf Lands Act (43 U.S.C. 1331 et seq.); and

(B) that, if any acceptable bids have been received for any tract offered in the lease sale, results in the issuance of a lease.

(3) ONSHORE LEASE SALE.—The term ‘‘onshore lease sale’’ means a quarterly oil and gas lease sale—

(A) that is held by the Secretary in accordance with section of the Mineral Leasing Act (30 U.S.C. 226); and

(B) that, if any acceptable bids have been received for any parcel offered in the lease sale, results in the issuance of a lease.

(b) LIMITATION ON ISSUANCE OF CERTAIN LEASES OR RIGHTS-OF-WAY.—During the 10-year period beginning on the date of enactment of this Act—

(1) the Secretary may not issue a right-of-way for wind or solar energy development on Federal land unless—

(A) an onshore lease sale has been held during the 120-day period ending on the date of the issuance of the right-of-way for wind or solar energy development; and

(B) the sum total of acres offered for lease in onshore lease sales during the 1-year period ending on the date of the issuance of the right of-way for wind or solar energy development is not less than the lesser of—

(i) 2,000,000 acres; and  

(ii) 50 percent of the acreage for which expressions of interest have been submitted for lease sales during that period; and

(2) the Secretary may not issue a lease for offshore wind development under section 8(p)(1)(C) of the Outer Continental Shelf Lands Act (43 U.S.C. 2 1337(p)(1)(C)) unless—

(A) an offshore lease sale has been held during the 1-year period ending on the date of the issuance of the lease for offshore wind development; and

(B) the sum total of acres offered for lease in offshore lease sales during the 1-year period ending on the date of the issuance of the lease for offshore wind development is not less than 60,000,000 acres.

(c) SAVINGS.—Except as expressly provided in paragraphs (1) and (2) of subsection (b), nothing in this section supersedes, amends, or modifies existing law.