Government Shutdown Would Negatively Impact U.S. Oil, Natural Gas Production

From Americans sent home without pay for an unknown amount of time to the shutdown of most government services, a federal shutdown could have far-reaching consequences across the country, including to our nation’s energy security.

It’s no secret that under the Biden administration, there has been increased uncertainty for producers developing oil and natural gas on federal lands and waters.

Federal leasing has been practically non-existent since 2021 both onshore and offshore. Interior’s final Outer Continental Leasing five-year leasing plan released this week which allows for the bare minimum three sales to allow for offshore wind development, was just the icing on the cake for policies that limit access for production and make it increasingly more expensive to invest.

The U.S. oil and natural gas industry needs fair and consistent leasing regulations to enable us to continue to supply these critical resources domestically and abroad, and to have the supply needed to help stave off the price impacts of OPEC+ production cuts and increased seasonal demand.

Amidst this backdrop, there’s now a threat of even more uncertainty as a result of the potential government shutdown. As Western Energy Alliance’s Kathleen Sgamma said earlier this week, Interior does not need another “excuse for delaying and preventing approvals on federal lands and waters”:

​“Companies with active operations on federal lands must be in regular communication with Bureau of Land Management personnel to react to changing situations on the ground. When there’s nobody on the line at local field offices to answer a question or approve operational changes as they arise, companies cannot safely and effectively move forward with energy development. We urge Congress to find a short-term solution to avoiding a shutdown as well as a long-term fix so that these disruptions don’t continue to happen every few years. Even the threat of a shutdown causes hiccups in the system and contributes to the chronic uncertainty that plagues production on federal lands.” (emphasis added)

That’s why the Petroleum Association of Wyoming sent a letter to Interior Secretary Deb Haaland and Bureau of Land Management Director Tracey Stone Manning urging them “to request that necessary permits for pending production of oil and natural gas continue to flow in the event of a government shutdown.” PAW continued:

“Given that the Bureau of Land Management’s federal mineral program is the second largest source of revenue to the federal government, the program more than covers the costs associated with staffing and resources necessary to approve permits. The program can operate self-sufficiently, and did so during the last shutdown in 2019 to the great benefit of the American people and the State of Wyoming. The program should be allowed to do so again in the event of a shutdown this year.”

Bottom Line: Congress needs to avoid a shutdown at all costs, and if that cannot happen, the Department of Interior must do its part to prevent a disruption to critical energy production. They’ve done it before and cannot afford not to do it again. As my colleague, IPAA Chief Operating Officer Dan Naatz said in 2019:

“It’s that uncertainty that can really cast a long shadow as you’re trying to make investments, especially for our smaller companies. We hope the White House and Congress – all this is above our pay grade – but we hope they will take action and the shutdown will be resolved soon.”

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