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New bill would prevent rule from increasing the costs of oil and gas production

The Restoring American Energy Dominance Act would prevent increased bonds on federal lands
A flare to burn methane from oil production is seen on a well pad near Watford City, N.D., in 2021. The Biden administration is proposing new rules for the nation’s oil and gas leasing program that would raise costs for energy companies to drill on public lands and strengthen requirements for cleaning up old wells where drilling is completed or abandoned. (Matthew Brown/Associated Press file)

WASHINGTON – A bill introduced by U.S. Rep. Lauren Boebert would prevent a proposed rule to raise bonding levels on millions of acres in Colorado that would restrict oil and gas leasing on federal lands.

The Fluid Mineral Leases and Leasing Process rule proposed by the Bureau of Land Management would change fees, rents and royalties to reflect provisions from the Inflation Reduction Act.

It will also update bonding requirements for leasing, development and production on federal land, as well as include preference criteria to protect critical habitats and endangered species.

Boebert’s legislation, the Restoring American Energy Dominance Act, also co-sponsored by 10 other representatives, would prevent the BLM from passing the proposed rule and other similar rules.

The BLM rule seeks to prevent orphan wells on federal lands and use bonds for well plugging, which occurs by removing a pumping system and structures and then later sealing it.

Michelina Paulek, executive director of the Energy Council, said the rule doesn’t recognize regional differences in the demonstrated cost of plugging, resulting in high costs for the small independent producers that produce 90% of the country’s gas and oil.

“You can’t just send a blanket bond that says, we want you to bond up for $140,000 per well when the demonstrated cost might be $25,000,” she said. “Plugging in and abandoning wells in Colorado is very different than it would be in Wyoming or very different than Utah. So it needs to have a demonstrated cost by region and that needs to be looked at on a frequent basis.”

This rule would affect the 365 wells currently in operation in La Plata County. The counties with the highest number of wells are on the Western Slope, including Rio Blanco, Garfield and Mesa counties.

Other states would also feel the effects, according to written testimony provided by Tom Kropsatch, the state oil and gas supervisor for the Wyoming Oil and Gas Conservation Commission.

“What BLM fails to recognize is most small operators cannot obtain a surety bond without significant collateral, typically 100% cash collateral,” he said in a news release. “In our review, we have determined that the minimum bond amount would exceed the gross annual revenue of more than 25% of the companies operating on federal lands in Wyoming.”

The rule would increase the minimum lease bond amount to $150,000 and the minimum statewide bond to $500,000 while eliminating nationwide bonds. Other specific features of the rule following the IRA include increasing the national minimum bid from $2 per acre to $10 per acre, and the establishment of a new fee for expressions of interest.

The rule also aims to prevent development in areas with important wildlife habitats or cultural sites. Instead, it encourages development in areas with already existing infrastructure, according to the U.S. Department of the Interior.

Weslan Hansen is an intern for The Durango Herald and The Journal in Cortez and a student at American University in Washington, D.C. She can be reached at whansen@durangoherald.com.

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