In the spring, the federal government will be issuing a new rule aimed at modernizing federal oil and gas leasing regulations. In July, the Department of Interior, Bureau of Land Management (BLM) proposed a new rule, designed to update the fiscal terms of existing oil and gas leasing regulations to reflect provisions of recently enacted federal legislation, the Inflation Reduction Act and Infrastructure Investment and Jobs Act. See Fluid Mineral Leases and Leasing Process, 88 Fed. Reg. 47,562 (proposed July 24, 2023). These regulations, located at 43 C.F.R. pt. 3000 and 3100 et seq., have not been significantly modified since 1988, and this new rule comes amid increased scrutiny over whether existing regulations are outdated and no longer protective of the federal government’s fiscal interests.

Under the Federal Land Policy Management Act, BLM is responsible for managing approximately 245 million acres of federal public land and 700 million acres of subsurface federal minerals. Within this responsibility, BLM administers the federal onshore oil and gas leasing program. The fiscal terms of oil and gas leases are set out in the federal Mineral Leasing Act, which establishes the specific costs for acquiring and maintaining a lease. These costs include application fees, minimum bids, rental and royalty rates, and a minimum bond amount. Minimum bids are used to facilitate competitive lease sales, where lands will be leased to the highest bidder. During each lease, the lessee will pay an annual rent per acre until the land begins producing oil and gas, at which point the lessee will pay a royalty rate of the value of the oil and gas produced. Bonds are put up by a lessee prior to performing work on the land to protect the federal government in the event the lessee does not reclaim the land after its operations cease. This monetary amount will then be used by the federal government to restore the leased lands. There are currently four types of bonds that exist—individual lease, statewide, nationwide and unit operator.