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Biden Wants Oil Companies to Pay Penalties on Unused Drilling Leases

Biden Wants Oil Companies to Pay Penalties on Unused Drilling Leases
© Bloomberg. An oil pump jack operates at the Inglewood Oil Field in Culver City, California, U.S., on Sunday, July 11, 2021. Oil dipped after a two-day gain as investors assessed the demand outlook amid a resurgence of Covid-19 in many regions. Photographer: Kyle Grillot/Bloomberg

(Bloomberg) — U.S. President Joe Biden wants oil drillers to pay penalties when federal leases go unused in an effort to prod the industry into pumping more.

The White House will call on Congress to “make companies pay fees on wells from their leases that they haven’t used in years and on acres of public lands that they are hoarding without producing,” the administration said in a statement on Thursday. “Companies that are producing from their leased acres and existing wells will not face higher fees.”

The proposal threatens to widen the gap between Biden and oil explorers who say his administration’s anti-fossil fuel agenda is partly responsibly for chilling investment in new oil wells. The White House has pushed back, saying the companies are plowing the windfall from $100-a-barrel crude into shareholder dividends and buybacks rather than new drilling that would help tamp down sky-high gasoline prices. 

U.S. oilfields are pumping about 11.7 million barrels a day, about 10% lower than they were prior to the outbreak of the Covid-19 pandemic, despite the doubling in domestic crude prices since the beginning of 2021. 

White House Press Secretary Jen Psaki has faulted oil producers for sitting on 9,000 approved-but-unused permits on leased federal lands. The industry’s defense is not every tract is a viable drilling target and that other White House moves like canceling the Keystone XL pipeline have made executives and investors wary about putting money at risk in new projects. 

©2022 Bloomberg L.P.

Source: Investing.com

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