If it passes, the deal would modernize the federal oil and gas program but lock in years of new leasing
After saying he couldn’t reach a deal with his fellow Democrats and the White House on climate action, Senator Joe Manchin changed his tune two weeks later, announcing that he and Senate Majority Leader Chuck Schumer had formulated a sweeping bill that addresses inflation, healthcare costs, and climate change — promising to cut carbon emissions by 40 percent by 2030.
The Inflation Reduction Act of 2022 makes unprecedented investments in fighting climate change as well as major reforms to the federal onshore oil and gas leasing program, such as:
- Raises royalty rates from 12.55% to 16.66% as well as minimum bids from $2/acre to $10/acre, ending the public lands giveaway and discouraging oil and gas companies from locking up more land than they need.
- Adds a $5 per acre fee for expressing interest in federal land for leasing, ending the free-for-all system that allowed anyone to nominate public lands for drilling anonymously.
- Eliminates non-competitive leasing, which previously allowed companies to snap up public lands with low oil production potential at the bargain basement price of $1.50/acre.
- Significantly increases bonding requirements for oil and gas drillers to at least $150,000 for an individual lease, $500,000 for all leases in a state, or $2,000,000 for all leases by a company nationwide, ensuring taxpayers aren’t stuck footing the bill for the messes made by oil and gas companies.
- Adds a royalty on all methane that is extracted from public lands, including methane that is vented or flared, disincentivizing oil and gas companies from releasing excess methane into the atmosphere.
- Provides significant funding to clean up abandoned wells and for methane mitigation and monitoring, further curbing methane emissions as well as addressing the air and groundwater pollution caused by the millions of orphan wells across the country.
“This bill includes the first meaningful reforms to the oil and gas leasing system in a hundred years,” Center for Western Priorities Executive Director Jennifer Rokala said in a statement. “If it becomes law, it will represent a turning point in America’s energy and climate policy. The climate measures in the reconciliation bill are a major victory for the country, and the reforms to oil and gas leasing will ensure taxpayers get a fair return during the transition to a clean energy economy.”
The bill also contains some counterproductive measures, including reinstating the contested November 2021 offshore lease sale of 80 million acres in the Gulf of Mexico, requiring the Interior Secretary to hold onshore and offshore lease sales of at least 2,000,000 and 60,000,000 acres, respectively, in order to advance renewable energy projects, and requiring the onshore lease sales to include at least 50% of the acres nominated by oil and gas companies.
Finally, Manchin purportedly reached a side-deal with Democratic leaders to advance legislation that would expedite the process for approving new energy projects and allow a $6.6 billion natural gas pipeline in West Virginia to move forward. This new legislation would be introduced separately from the Inflation Reduction Act and would require 60 votes to pass the Senate. Manchin has said his vote on the climate deal is contingent on Congress later passing this legislation.
That’s a nice climate bill you’ve got there… but can it pass?
With Manchin’s support, the question is whether or not Schumer can get the bill to President Biden’s desk before the Senate’s recess beginning August 8.
Since the bill is passing through the reconciliation process, it first has to get through the referee of the Senate, known as the parliamentarian. Reconciliation allows Democrats to bypass a Republican filibuster and pass legislation on a 50–50 vote (with Vice President Kamala Harris breaking the tie) rather than a 60-vote filibuster-proof majority. But reconciliation also requires that everything in the bill be budget-related, and Republican senators are already preparing parliamentary challenges to individual parts of the act. The nonpartisan parliamentarian will decide what parts of the bill can stay in before it heads to the full Senate for a vote.
Next, Schumer has to get every Democrat in the Senate on board — and physically onto the Senate floor — which could be challenging given at least one Democrat currently has COVID-19, another is recovering from a broken hip, and Arizona Senator Kyrsten Sinema has not announced whether or not she’ll support the bill. Since all Republican senators are expected to vote against the package, Sinema must vote yes for it to pass.
And of course, after passing the Senate, the bill has to pass in the House, where progressive Democrats could find fault with the bill on grounds that it locks in fossil fuel development or doesn’t go far enough to address climate change. However, Representative Alexandria Ocasio-Cortez, perhaps the most high-profile progressive Democrat in the House, has indicated she will likely support the package.
Implementation: the devil in the details
If the Inflation Reduction Act defies the odds and becomes law, the Interior Department will find itself facing a daunting task: implementing a massive overhaul of the hundred-year-old oil and gas leasing system.
The requirements of the bill, ranging from the new fee on nominating parcels for leasing, to paying royalties on wasted methane, to updated bonding requirements for drillers, will require rulemakings and instructional memoranda across the Interior Department, especially the Bureau of Land Management. These rules and policies will shape how the new system interacts with the alphabet soup of existing land management and environmental laws, ranging from FLPMA to NEPA to the ESA. And they will be the key to the success or failure of the leasing overhaul.
Completing a complex rulemaking is a task that can take months or even years of public comment and revisions. With roughly two years left in President Biden’s first term (and the shadow of the Congressional Review Act looming if Republicans take control of Congress and the White House in the 2024 elections), the department will need to move quickly but carefully to ensure its implementation survives any legal challenges.
So what happens if the bill doesn’t pass?
Remember: the climate deal only promises to reduce emissions by about 40 percent. So whether or not the bill passes, President Biden will need to take action if he wants to reach his own goal of reducing greenhouse gas emissions by 50 to 52 percent by 2030. To start, he could announce a climate emergency, which would signal to the world that the U.S. is taking climate change seriously as well as give Biden extra power to do things like end oil exports and require companies to manufacture more clean energy infrastructure.
The president also presides over all of the federal agencies, like the Environmental Protection Agency and the Interior Department, and he can order them to issue new regulations to help fight climate change. Agency actions can be used to decarbonize the economy by limiting carbon emissions from the power sector. The EPA retains plenty of authority to issue air quality standards, despite the recent Supreme Court ruling. Biden has already ordered the Interior Department to review the federal oil and gas program, which sets the rules for drilling on public lands. The agency could achieve a number of the same reforms included in the IRA through the rulemaking process, such as raising royalty and rental rates and ending non-competitive leasing. It could also set strong standards for which lands are appropriate for oil and gas leasing and which are not.
In addition to these rulemakings, Biden can take major steps to reign in fossil fuels right now by rejecting a massive oil drilling proposal in the arctic called the Willow Project, issuing a full coal leasing moratorium, and ending all new offshore oil and gas leasing.
So, while it may feel like the future of our planet hinges on this climate deal passing, there are actually a number of meaningful climate solutions Biden can and should enact — regardless of what Congress does.