Few things can serve as a catalyst for changing a particular policy direction like an international crisis – except for a domestic economic crisis. A key part of President Joe Biden’s energy policy ran straight into the middle of both. 

It didn’t take Biden very long, after setting up shop in the Oval Office, to start curbing U.S. oil-and-gas production, most notably by suspending energy leasing on federal lands. In a rather dramatic reversal of policy, the Department of Interior recently announced a notice “for significantly reformed onshore lease sales.” The notice will permit the auctions of certain federal lands, with the first sale taking place in Wyoming in June. 

This is a welcome new development, to be sure, and a positive step in the direction of energy reality. But, as would perhaps be expected of an administration as umbilically tied to the environmental lobby as this one, the good news comes tempered. Yes, oil and gas lease sales will be allowed to resume on federal lands, but the royalty rate producers have to pay for the privilege of operating on those lands is going up by a full 50% – from 12.5% to 18.85%. This is the first time ever the federal government has raised rates since they were imposed in the 1920s under the Mineral Leasing Act (MLA). 

Biden has made no secret of his antagonistic disdain for the domestic fossil fuel industry, at least not since his inauguration 15 months ago. His new presidential hand towels had barely been delivered before he commenced signing executive orders restricting the ability for American companies to produce and transport energy around the country. One of the most prominent was the one on federal leasing, which directed the Secretary of the Interior to “pause new oil and natural gas leases on public lands or in offshore waters” and begin a thorough review of existing permits for fossil fuel development. On top of having the entirely predictable effect of being disproportionately harmful to western states with a substantial amount of federally-owned acreage, like New Mexico and Colorado, the order also conflicts with the letter of the law, which requires lease sales on federal land “at least quarterly.” 

In any case, had federal leasing not been paused last year, the U.S. would be sitting on a greater supply of domestically-produced oil and natural gas today, and in a far better position to try and curb higher domestic fuel prices and offer some relief to European markets trying to cold-turkey their way off of Russian blood oil.  

Whatever altruistic motivation the President and his advisors may have convinced themselves they had to constrict domestic production, economic and geopolitical reality ought to have disavowed them of those. In addition to contributing to the significant rise in energy-price inflation, the policy has threatened the livelihood of thousands of oil-and-gas workers and chiseled away at the budgets of state and local governments that rely on oil-and-gas royalties.

At a national level, the suspension of leasing has greatly restricted the ability for new wells to become operational, thus keeping our resources in the ground instead of in pipelines, storage tanks, ships, power plants and gas tanks. Say what you will about his predecessor, but prior to the Biden administration private energy companies worked pretty well in partnership with federal agencies to safely extract natural resources from both federal and private lands. As a result of years of collaboration, production from federal lands and waters accounted for nearly a quarter of total U.S. oil production and about 11% of our natural gas supply. 

It’s no mystery what motivated the President to reverse course on the federal leasing suspension. He was in office during the gas lines of the 1970s, after all, and has no particular desire to relive those days, at least not from a political standpoint. The crisis in the Ukraine served as something of an exclamation point on America’s vacuous energy policies, which, in addition to highlighting the weighty importance of energy security, had made the U.S. irrelevant in terms of replacing Russian energy sources to Europe.

So the administration had really no choice but to change course, but the President included a caveat – an increase to royalty rates.  

This move will be counterproductive. Increasing royalty rates on producers upsurges their operating costs, which in turn are likely to be passed along to consumers through even higher energy prices. This is the same economic lunacy as raising taxes in the midst of inflation. It will also, in all likelihood, depress production. 

The Interior Department has also only offered a meager percentage of the acreage available for energy exploration – an 80% reduction from the acreage originally analyzed. This raises an eyebrow as to their enthusiasm to help Americans who are watching their bank accounts drain at the pump. With energy producers still waiting on the Biden Administration to announce their intent to renew the 5-year offshore leasing plan, which expires at the end of June, it’s an understandable concern.

Biden’s modest inching toward sensible energy policy was forced by reality; which leaves one wondering how much worse reality has to get before the President commits fully to reason.

Kelly Sloan is a political and public affairs consultant and a recovering journalist based in Denver.