Inflation Reduction Act - Federal Oil and Gas Leases

On August 16, 2022, President Biden signed into law the Inflation Reduction Act (the Act), which expands clean and renewable energy production, promotes carbon reduction and sequestration technologies, and highlights a host of other climate policies. Specifically, the legislation included many changes in the world of federal oil and gas leases.?Here is a quick rundown of some elements of the new law:

·????????Requires regular oil and gas lease sales

·????????BLM is prohibited from issuing rights-of-way (ROW) for wind or solar development on federal land unless an onshore oil and gas lease sale has occurred within 120 days before the wind or solar lease issuance;

·????????Additionally, wind and solar ROWs are prohibited, unless in the previous year, BLM completed onshore oil and gas lease sales covering 2,000,000 acres or 50% of the acreage in which interested parties have expressed interest, whichever is lower;

• BLM to collect a fee of at least $5 per acre from any person who nominates federal land for oil and gas leasing;
• BLM is prohibited from issuing oil and gas leases on a non-competitive basis;
• Establishes a minimum bid of $10 per acre for leases sold competitively;
• Establishes a minimum rent to $3 per acre for the first 2 years of a lease, $5 per acre for the subsequent 6 years, and $15 per acre thereafter;
• Increases the minimum royalty rate to 16 2/3%;
• Increases rate on back royalties and reinstated leases from 16 2/3% to 20%
• Back rentals and rent for reinstated leases increased to $20/acre from $10/acre

·????????Updated onshore bonding requirement

• Individual lease bond minimum: $150k
• Statewide bond minimum: $500k
• Nationwide bond minimum: $2 million
• Adjust for inflation every 4 years

At Reagan Smith, we handle more that just what happens on the land, but everything behind the scenes! Learn more about our land services regarding titles, transaction and leasing at https://www.reagansmith.com/land.