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A horizontal drilling rig and a pump jack sit on federal land in Lea County, N.M. Photo: Callaghan O'Hare/Bloomberg via Getty Images

Oil and gas companies should pay more to drill on federal lands and waters, the Department of the Interior argued in a report released Friday, saying that the current rates were "outdated."

Driving the news: The Department of Interior report said that the federal government's oil and gas leasing and permitting program "fails to provide a fair return to taxpayers, even before factoring in the resulting climate-related costs that must be borne by taxpayers."

  • The report found that the current program "falls short of serving the public interest" and "shortchanges taxpayers and States."

The big picture: The report recommends increasing the 12.5% royalty rate the government charges to match higher rates that private landowners and major oil and gas producing states charge.

  • Federal royalty rates had not increased for 100 years, the report said, and as a result, the federal government often charges less than what companies pay states and private landowners.
  • The Texas royalty rate, for example, can be double the federal rate, according to the Department of Interior.

By the numbers: The report stops short of proposing a specific increase to the royalty rate, but hiking the minimum to the 18.75% charged for drilling in deep waters offshore would raise an additional $1 billion a year through 2050, The Washington Post reports.

Our thought bubble: The Black Friday release underscores how the administration is in a politically delicate spot on oil-and-gas policy, Axios' Ben Geman writes.

  • Biden campaigned on aggressive steps to limit federal lands development as part of his wider climate agenda. But the administration also faces political jeopardy from elevated gasoline prices (though they're likely to fall thanks to declining oil prices) and just days ago announced a major oil release from the Strategic Petroleum Reserve.

The bottom line: While the Interior report backs a more restrictive approach to leasing, it stops far short of endorsing a halt to selling oil-and-gas drilling rights on federal lands and waters, Geman notes.

  • "This approach could still significantly curtail future federal oil and gas production activity while remaining consistent with existing laws," a note from research firm ClearView Energy Partners said.

Go deeper

Ben Geman, author of Generate
Jan 13, 2022 - Energy & Environment

Biden's climate runway is shortening

Expand chart
Data: U.S. Energy Information Administration; Chart: Jacque Schrag/Axios

The Biden administration is expanding efforts to speed clean electricity expansion with its existing powers, but faces big obstacles to meeting its climate goals without far more help from Congress.

Why it matters: President Biden has set a goal of reaching 100% carbon-free power by 2035 and cutting economy-wide greenhouse gas emissions — that is, power, transport, industry, etc. — in half by 2030.

IRS "in crisis," government watchdog says

The seal of the Internal Revenue Service (IRS) at the agency's headquarters in Washington, D.C. Photo: Andrew Harrer/Bloomberg via Getty Images

The Internal Revenue Service began the last filing season with a backlog of 11.7 million returns from 2020, and the 2019 returns were not cleared until June 2021, according to a new report by the National Taxpayer Advocate.

Why it matters: "During 2021, tens of millions of taxpayers were forced to wait extraordinarily long periods of time for the IRS to process their tax returns, issue their refunds, and address their correspondence," wrote national taxpayer advocate Erin Collins, adding that "the IRS is in crisis."

Updated 6 hours ago - Energy & Environment

Bomb cyclone prompts blizzard warnings from Virginia to Maine

Computer model projection showing the intense storm off of Cape Cod on Jan 29, 2022, with heavy snow and strong winds lashing the coastline. (Weatherbell.com)

Blizzard warnings are in effect for 11 million people from coastal Virginia to eastern Maine as a historic winter storm is set to slam the Mid-Atlantic and Northeast beginning Friday.

Why it matters: The storm will bring hazards ranging from zero visibility amid hurricane force wind gusts and heavy snow, to coastal flooding that will erode vulnerable beaches and threaten property from the Jersey shore to coastal Massachusetts.