Federal Leasing Ban Will Impact Energy Security
On Wednesday, President Biden issued a ban on new oil and natural gas leases on federal lands and waters, the impacts of which will be felt in communities across the country.
Some states, such as New Mexico, will feel the effects of the ban sooner than others. On a recent media call hosted by the American Petroleum Institute, Ryan Flynn, President of the New Mexico Oil and Gas Association, explained how the state relies heavily on energy production on public land:
“Our state is dependent on oil and gas revenue. Nearly one-third of our state’s budget comes directly from oil and gas revenue, and of that one-third approximately $1 billion comes from revenue generated on federal public lands.”
And New Mexico is not alone. Todd Staples, President of the Texas Oil and Gas Association, expressed a similar reliance on federal land production in the Lone Star State:
“Banning energy development on federal lands and in offshore waters not only threatens thousands of the best paying jobs but needlessly erases much-needed revenue that helps pay for schools and other essential services…In fiscal year 2020 alone, the industry in Texas paid $13.9 billion in state and local taxes and state loyalties…These funds directly support Texas teachers and schools, roads, infrastructure, and essential services.”
Furthermore, Staples mentioned how even though the majority of onshore Texas oil and gas production occurs on private land, the impacts of a ban would still hit the state hard:
“We certainly have a significant amount of offshore influence. Offshore energy alone accounts for about 15 percent of our entire national energy supply. And you’ve got over 200,000 jobs along the Gulf Coast region that would be lost by 2022 and 120,000 of those would be in Texas.”
Tyler Gray, President of the Louisiana Midcontinent Oil and Gas Association, explained that jobs lost along the Gulf of Mexico are not limited to the energy industry. When asked who will be affected by the permitting and leasing bans, Gray explained:
“You’re also looking at the indirect jobs, which are the folks that are constructing the pipes, the drill bits, all the other mechanisms that go out into the Gulf of Mexico. We’re also concerned about the induced jobs. The jobs of the car dealers and the grocery stores that are in Galliano, Louisiana where [oil and gas workers] go to buy their lunch.”
Small businesses will be hit hard in Wyoming, as well. According to Pete Obermueller, President of the Petroleum Association of Wyoming,
“Over 80 percent of Wyoming’s producers are small, small businesses. In fact, mom and pops make up the lion’s share of the production of the companies that do the production in Wyoming.”
And it appears these smaller producers make a huge difference for the state’s coffers:
“Those companies, along with the other larger companies, provided for the state of Wyoming over $1.6 billion in annual revenue from 2019, including $740 million for K-12 education plus an additional $30 million for higher education, $132 million in infrastructure projects, and $94 million for our state’s counties.”
Energy and the Environment
From Wyoming to Louisiana, state and local economies will begin to feel the impacts of these moratoriums immediately. As expressed by Jim Willox, President of the Wyoming County Commissioners Association:
“This ban on development on federal lands is not a comprehensive climate policy, it is not a comprehensive energy policy, rather it is a job-killing, economically punishing policy.”
And he is correct. Many industry leaders, including API’s President and CEO Mike Sommers, have expressed that if the Biden Administration continues with policies like the leasing ban, there will be dire environmental consequences:
“Americans are still going to demand access to these kinds of products. They are still going to demand energy from oil and gas. It isn’t as if once you cut off oil and gas development in the United States that we are using other products. We’re still going to be importing those products from other countries if you cut off development in the United States.”
LMOGA’s Tyler Gray also touched on additional environmental impacts his state would face as oil and gas revenue is a major funding source for coastal restoration efforts:
“Revenues from oil and gas activity in the Gulf of Mexico are a primary funding source for critical coastal restoration and hurricane protection projects to help make our community safer and stronger. The Gulf of Mexico Energy Security Act, or GOMESA, allows Gulf states to share an offshore revenue generated from oil production. To data, GOMESA has allowed over $300 million to flow to states primarily for coastal restoration and hurricane protection. In fact, 34 percent of Louisiana’s Coastal Protection Office is funded through mineral revenues. These funds are invested in projects that better protect our communities, our cost, and our culture. Gulf of Mexico energy production is critical to national security, our national economy, and conservation of wildlife and public lands from sea to shining sea literally.
“That narrative that we must choose between energy and environment is fundamentally flawed. In Louisiana we know that we don’t have to choose.” (emphasis added)
What About Existing Leases?
One of the major questions asked by media on the call that has also been used as a pushback against concerns over the impacts of a moratorium, is the fact that there are existing leases and permits in place for development on federal lands. But, as participants such as Flynn explained, that doesn’t mean there won’t be immediate impacts.
“There are a number of operators right here in New Mexico who have federal leases but who have not been given permits or who have permits but still need to get approvals from the Bureau of Land Management (BLM) in order to actually develop that permit. So, they may have been given a permit and drilled the well, but they’re now unable to actually connect that well to a pipeline because they still need a fairly routine administrative approval for a right of way.
The 60-day order that was put in place last week has essentially suspended all regulatory activity…Essentially that’s freezing any types of authorizations…And by taking away the ability for career staff in the field offices to actually make those decisions, it absolutely is having an impact on operations today.”
There was resounding agreement that suppressing oil and gas production is not the answer, especially without a concrete plan in place for how to supply enough energy to meet the nation’s growing demand. As was brought up numerous times during the call, the oil and gas industry is ready and willing to sit down with the federal government to find solutions without halting energy production. It remains to be seen if they will be invited to the table.