The Interior Department’s rule increases oil drilling royalties by more than a third, to 16.67 percent, in line with the comprehensive climate bill passed by Congress in 2022. The previous 12.5 percent rate oil and gas companies pay for federal drilling rights had remained unchanged for a century. The federal rate was significantly lower than what many states and private landowners charge for drilling leases on state or private land.

The new rule does not go so far as to ban new oil and gas leases on federal lands, as many environmental groups have called for and President Joe Biden promised during the 2020 campaign. But officials said the proposal would lead to a more responsible leasing process that would provide a better return to U.S. taxpayers and focus oil and gas drilling on the areas most likely to be developed, particularly those with existing infrastructure and high potential for oil and gas reserves.

The rule will also increase the minimum bond that energy companies must pay to $150,000, up from $10,000 set over 60 years ago. The higher bond requirements are designed to ensure that energy companies meet their obligations to clean up drilling sites after drilling is completed or to plug abandoned wells.

The plan codifies some provisions – including increasing royalties for at least 15 competitive lease sales – that have been provisionally enforced since the passage of the climate bill, known as the Inflation Reduction Act, in August 2022.

The rule also incorporates provisions of the Infrastructure Act of 2021 and recommendations from a 2021 Interior Department report on oil and gas leasing. That report recommended overhauling the oil and gas program to limit the land available for energy production and increase costs for oil and gas companies drilling on public lands and waters.

“These are the most significant reforms to the federal oil and gas leasing program in decades. They will curb wasteful speculation, increase returns for the public, and prevent taxpayers from being burdened with the costs of environmental cleanup,” said Interior Secretary Deb Haaland.

Along with efforts to clean up so-called orphaned or abandoned wells, “these reforms will help ensure the health of our public lands and surrounding communities for generations to come,” Haaland said. The rule will also reduce pressure to develop areas that contain sensitive wildlife habitat, cultural resources or recreational areas, she said.

The new royalty rate set by the climate law is expected to remain in effect until August 2032 and can be increased after that. According to the Interior Department, the higher rate would increase costs for oil and gas companies by an estimated $1.8 billion over that period.

The American Petroleum Institute, the oil industry’s main lobbying organization, said it was reviewing the rule to ensure that Biden’s Democratic administration promotes “fair and consistent access to federal funds” used by oil and gas companies.

“As energy demand continues to grow, oil and natural gas production on federal lands will be fundamental to maintaining energy security, fueling our economy and supporting state and local environmental protection efforts,” API Vice President Holly Hopkins said in a statement. “Overly burdensome land management regulations will put this critical energy supply at risk.”

Environmental groups welcomed the rule change as a way to hold energy companies accountable that have long had cheap access to federal lands.

“For far too long, oil and gas companies have profited from the gifts they receive to drill on our public lands. This rule will finally curb some of these wasteful grants to the fossil fuel industry,” said Josh Axelrod, senior policy attorney at the Natural Resources Defense Council. “Communities, conservationists and taxpayer advocates have been demanding many of these changes for decades, and it’s great news that the Biden administration is acting on them today.”

The Center for Biological Diversity, another environmental organization, criticized the government for not directly addressing the climate crisis by stopping drilling on public lands.

“Updating oil and gas regulations on federal lands without setting a timeline for stopping drilling is climate change denial, plain and simple,” said Gladys Delgadillo, a climate activist with the Arizona-based group. “Public lands should be places where people can enjoy nature and wildlife can roam freely, not hotspots for toxic pollution.”

The change in bond rates is a key element of the new rule, officials said. The previous $10,000 rate, introduced in 1960, was far too low to force companies to clean up old well sites and did not cover the potential costs of rehabilitating a well, officials said. As a result, taxpayers often have to foot the bill for cleanup of abandoned or depleted wells when an operator refuses to do so or declares bankruptcy. Hundreds of thousands of abandoned oil and gas wells and abandoned coal and rock mines pose serious safety risks and cause ongoing environmental damage.

Over the past two years, the Department of the Interior has allocated more than a billion dollars from the Infrastructure Act to clean up abandoned oil and gas wells on public lands. The new rule is intended to prevent this burden from being passed on to taxpayers in the future.

Tracy Stone-Manning, director of the Bureau of Land Management, whose agency issued the new rule, said it will “help protect important wildlife habitat, cultural resources and recreational values” while ensuring a fair return for taxpayers. The Bureau of Land Management manages more than 245 million acres of public lands, mostly in the West.

The representatives were divided between the parties. Representative Raul Grijalva from Arizona, the highest-ranking Democrat on the House Natural Resources Committee, described the regulation as an important step to keep the oil and gas companies in check.

“If the oil industry is going to use our public lands, it stands to reason that it should offer American taxpayers a fair return for that privilege,” he said. “That’s why Democrats worked so hard to pass reforms in the Inflation Mitigation Act to bring some balance back to a leasing system that has favored polluters for far too long.”

John Barrasso, Senator from Wyoming and the ranking Republican on the Senate Energy and Natural Resources Committee, said the rule would impose unfair costs on energy companies, leading to less drilling, fewer jobs and greater dependence on oil from the Middle East.

“As a candidate, Joe Biden recklessly threatened to end oil and natural gas production on federal lands,” Barrasso said. “As president, he is doing everything he can to make energy production on federal lands economically impossible.”