Gutted Offshore Leasing Plan Threatens American Energy Security and Economic Prosperity
After delaying for more than a year, the Biden administration’s Department of Interior finally released its five-year program for federal offshore leasing – a plan that includes the lowest number of auctions in the program’s history – even as prices at the pump continue to rise.
The plan is a stark difference from the typical 15-20 lease sales of past plans and is significantly fewer than the Obama administration’s 11 sales. In a press release highlighting the plan, Interior Secretary Deb Haaland brags that it “includes zero oil and gas lease seals in the Atlantic, Pacific and Alaskan waters,” and reflects the “rapid and accelerating shift to clean energy.” Conveniently, the three sales offered are the minimum amount DOI the Inflation Reduction Act mandates the department hold in order to pursue offshore wind development.
In response, the National Ocean Industries Association described the offshore leasing plan as an “utter failure,” decrying it as the Biden administration “ignoring energy realities”:
“The White House simply ignores our energy realities, once again limiting U.S. energy production opportunities. With global demand at record levels and continuing to rise, regressive policies like this serve to harm Americans of all walks of life by putting upward pressure on prices at the pump, destroying good-paying jobs that form the fabric of Gulf Coast communities, and relinquishing geopolitical advantages of energy production to countries like Russia, Iran, and China.”
A quick reminder on how we got here: In July of 2022, for the first time in American history, DOI allowed the legally mandated Outer Continental Shelf (OCS) 5-year offshore leasing program to expire without having a new plan in place. Since then, DOI has continued to obstruct and stall, despite a Congressional hearing showcasing the economic necessity of the plan, an August letter from the Independent Petroleum Association of America, the American Petroleum Institute, and fifteen other energy trade associations urging the Biden administration to support U.S. energy security, and bipartisan support for robust and healthy offshore leasing.
DOI’s new plan disregards all of this and represents the smallest number of oil and gas sales ever, a move that Sen. Joe Manchin (D-WV) scorched as a “failure of leadership:”
“It’s now clear without a shadow of a doubt that without the IRA, this Administration would have ended federal oil and gas development completely. But instead of embracing the all-of-the-above energy bill that was signed into law, this Administration has once again decided to put their radical political agenda over American energy security, and the American people will pay the price….it makes no sense at all to actively be limiting our energy production while our adversaries are weaponizing energy around the world.” (emphasis added)
Offshore Leasing Crucial to Economic and Energy Security
Limiting offshore leasing directly threatens American energy security, good-paying jobs for workers, and billions of dollars in revenue. Federal offshore oil production from the Gulf of Mexico (GOM) accounts for 15 percent of total U.S. crude oil production, meaning that limiting new lease sales on the OCS has long-term impacts on domestic supply and export capacity.
A joint report from API and NOIA highlights these obvious limitations:
“With a 5-year offshore leasing program, the Gulf of Mexico is projected to produce an average of 2.6 million barrels per day of oil and natural gas from 2022 – 2040. A delay in the program could mean nearly 500,000 barrels per day less over that time period.” (emphasis added)
But delaying and limiting production on American lands and waters won’t stop the need for oil: it just means that production will move outside of U.S. borders. Emphasizing this, IPAA President and CEO Jeff Eshelman said:
“It’s clear that the Biden Administration has chosen to align its policy decisions with environmental activists rather than put the best interest of American consumers first. A plan with only three leases in five years will not only hamper American production but jeopardizes our energy security and will result in hundreds of millions of dollars of lost revenue to coastal states and the federal treasury. The sad truth is that this plan will force the U.S. to get oil from other nations rather than develop American resources by American companies.” (emphasis added)
Greater reliance on foreign energy also means greater reliance on countries with looser environmental and safety standards, directly contradicting the Biden administration’s stated goal of decreasing greenhouse gas emissions. A study on global oil production from global advisory firm ICF shows that the Gulf of Mexico “has a carbon intensity 46 percent lower than the global average outside of the U.S. and Canada, outperforming other nations like Russia, China, Brazil, Iran, Iraq, and Nigeria.”
Further, the offshore industry plays a significant role as an economic driver for regional, state, and local economies. A 2022 API study showed that offshore production supports 370,000 well-paid American jobs in the GOM, with delays and limitations potentially impacting 60,000 of these jobs and over $1.5 billion in lost government revenue.
This revenue is used in public education, infrastructure, coastal restoration, hurricane protection programs, and more. In FY2021 alone, revenue from activities on the OCS such as lease sales, royalties and rental fees generated $4.1 billion – money that benefits all states, with specific emphasis on conservation programs.
For example, the Land and Water Conservation Fund (LWCF) has supported projects in every county in the country with nearly $19 billion in total appropriations since its inception, funded virtually entirely through revenues generated through offshore oil and gas activities and using “zero taxpayer dollars.”
Similarly, the Western Energy Alliance has explained:
“Under the Great American Outdoors Act (GAOA), our industry almost exclusively funds the $2.8 billion annually provided for infrastructure in national parks, wildlife refuges, and other public lands. GAOA established a new National Park and Public Lands Legacy Restoration Fund while permanently funding the popular Land and Water Conservation Fund. The former receives over 90 percent of its funding from onshore oil and natural gas production and the latter receives 100 percent from offshore production.” (emphasis added)
More Mixed Messages
The saga over the five-year leasing plan is just the latest in a series of moves from the Biden administration actively trying to phase out federal oil and gas production, even as oil prices rise to nearly $100 a barrel.
“The Biden administration has leased fewer acres for oil-and-gas drilling offshore and on federal land than any other administration in its early stages dating back to the end of World War II, according to a Wall Street Journal analysis.
“President Biden’s Interior Department leased 126,228 acres for drilling through Aug. 20, his first 19 months in office, the analysis found. No other president since Richard Nixon in 1969-70 leased out fewer than 4.4 million acres at this stage in his first term.”
Just this week, IPAA and energy groups across the country submitted comments to the DOI’s Bureau of Land Management over a newly proposed rule that they argue “rejects existing robust planning and environmental review processes” and enhances “BLM discretion to constrain onshore access.” Similarly, earlier this month the DOI attempted to limit offshore operations across the GOM under the guise of protecting the Rice’s whale, a move that a federal judge overturned calling it an “inexplicable about-face on the scientific record.” These follow on the heels of the Biden administration canceling the only active leases in Alaska’s Artic National Wildlife Refuge (ANWR), a move that garnered bipartisan backlash.
Commenting on the offshore leasing plan and the Biden administration’s missteps, API President and CEO Mike Sommers said:
“At a time when inflation runs rampant across the country, the Biden administration is choosing failed energy policies that are adding to the pain Americans are feeling at the pump. This restrictive offshore leasing program is the latest tactic in a coordinated strategy to reduce energy production, ultimately weakening America’s energy dominance, limiting consumers access to affordable reliable energy and compromising our ability to lead on the global stage. For decades, we’ve strived for energy security and this administration keeps trying to give it away.”
Bottom Line: The gutted five-year offshore leasing plan contributes to the Biden administration’s continued mixed messages on energy as they outwardly state they want to increase production, but then hamper energy production through all means possible. DOI’s limitation will only lead to increased gas prices, increased reliance on foreign oil, and decreased revenue for important projects that benefit American citizens across the country.