Federal Lands Orders Are Already Hurting Workers and Small Businesses in Western States
President Joe Biden’s executive order halting oil and gas leasing on federal lands has already dealt a severe blow to the economies of western states, but these impacts were minimized in the Energy Information Administration’s (EIA) latest energy outlook.
In its March report, the EIA, the federal government’s energy research arm, wrote that the federal leasing ban would only reduce annual production by less than 100,000 barrels and that the effects of Biden’s leasing ban would not be felt this year at all. According to the report:
“No effects will likely occur until 2022 because there is roughly a minimum eight-to-ten month delay from leasing to production in onshore areas and longer in offshore areas.”
But this isn’t what western states are seeing. Governors from both sides of the aisle, businesses, and industry groups have publicly highlighted how the ban has already begun to impact western states’ economies. Developing a particular lease can take years, meaning that companies worried about obtaining a drilling permit in the future are slowing investment in these projects today.
Communities that rely on oil and natural gas are bracing for the worst. In Wyoming, Sublette County Commissioner Joel Bousman described the ban in direct terms:
“We’re worried about total devastation of our economy in this county if this is truly an indication of the direction [Biden] wants to go….which he has said that it is.”
Bousman’s concerns are shared by many western leaders, who are starting to speak publicly about the real harms the moratorium is causing. In a letter to President Biden, the Western Governors’ Association warned that the leasing ban would push jobs and investment out of their states. They wrote:
“The economic effects of energy production, including oil and gas leasing on public lands are substantial in many western states. Oil and gas and renewable energy production supports thousands of well-paying jobs and rural small businesses, many of which are already struggling from the impact of the COVID-19 pandemic on energy use.”
The federal leasing ban is of particular concern in New Mexico, where more than 80 percent of energy production occurs on federal lands and oil and gas development is a major industry.
Janie Church, president of the Farmington Chamber of Commerce, said that the leasing ban could destroy the area’s economy by crippling a major sector of the economy without presenting anything to replace it. Even businesses outside of the energy sector rely on it, she told the local paper:
“We know that our businesses depend on oil and gas operations.”
Officials in New Mexico worry that a permanent leasing ban could push production over the border into non-public land in Texas – a reality the Federal Reserve Bank of Dallas recently acknowledged will have significant impacts on New Mexico:
“[B]etween 3,500 and 6,600 drilling and completions workers will not be needed in New Mexico from now through year-end 2025, while Texas will require between 5,400 and 7,400 more workers. The ramifications of the shift extend to support and corporate jobs, with secondary effects on local retail and hospitality sectors. The fiscal impact will also be large.” (emphasis added)
In a statement, New Mexico Governor Michelle Lujan Grisham’s office said:
“The governor and administration are concerned the federal policy could lead to energy companies leaving for other states like Texas…Companies or rigs that might leave here for Texas presents a two-fold issue in that it’s injurious to our revenue in the short-term and would seem to run counter to the federal intention of ensuring the kind of enhanced regulation that New Mexico has in place and a state like Texas does not.”
In fact, reports on the ground say this is already happening. For instance, John Waters, the executive director of the Carlsbad Department of Development, recently said that investment is already flowing out of the state:
“As a direct result of the executive order, I was just contacted by a Canadian company to inform me that the plant they were going to construct and operate in south Eddy County will instead go to Reeves County in Texas where their operation will not be surrounded by federal land.”
“We have seen rigs depart New Mexico for Texas simply because of the uncertainty caused by the Order.”
The concern is significant enough that Gov. Lujan Grisham recently requested a waiver from the federal orders for New Mexico.
Taxes and fees from oil and gas production are a key source of revenue for the New Mexico state government and have provided hundreds of billions of dollars to help fund education initiatives and other state programs. One recent study conducted by the New Mexico Tax Research Institute found that oil and gas production on federal lands accounted for $2 billion in state and local revenue and 18 percent of state spending in FY 2020.
Despite what the EIA might say, communities across the Mountain West are already feeling the bite the federal leasing moratorium, and fearing the worst if the policy is made permanent.