Interior Progresses On Federal Leasing, But Offshore and Onshore Sales Still Months Away
The comment period for the next five-year Outer Continental Shelf offshore leasing plan came to a close this past week, bringing the U.S. Department of Interior another step closer to finalizing a plan and resuming leasing in the Gulf of Mexico, despite repeated delays and obstruction throughout the process. Though even with the close of the comment period, it will likely be several more months before another offshore sale can be held.
The Independent Petroleum Association of America (IPAA) submitted comments to the Interior emphasizing how offshore leasing is critical to domestic energy production and ensuring the United States remains in control of its own energy future.
“Offshore operators rely on certainty for the multi-year process. A five-year gap would have devastating long-term impacts to not only producers but also the service and supply companies, who would no longer have contracts for work as a result. The Biden Administration is in the unique position to be the first in recent history, either Republican or Democrat, to reject the need and benefit of a strong domestic energy sector through continued offshore leasing and development. The United States must remain in control of our own energy future by maximizing our domestic energy production potential.” (emphasis added)
Reminder: this summer, Interior allowed the existing five-year offshore leasing program to expire without having a new plan in place for the first time in history. When the department’s proposed plan was finally released in August, it opened the door for the blocking of all new lease sales, an unprecedented move for an offshore leasing plan to include…no offshore leasing.
Interior itself acknowledged the impact this policy would have on American energy by spiking prices, stunting domestic production, and increasing the United States’ reliance on foreign energy sources, a move that just last week was shown to have severe consequences when OPEC+ slashed oil production by two million barrels per day.
As E&E News reported:
“The Biden administration estimates that slashing offshore oil sales would both increase the amount of crude the U.S. buys from other countries and depress oil demand by hiking fuel prices, validating a common industry criticism of climate policy.” (emphasis added)
Despite still not having a finalized five-year plan in place, the Biden administration did announce new movement on offshore and onshore federal leasing last week, due to Congressional action that was mandated in the recent Inflation Reduction Act that required onshore and offshore leasing in order to move forward with renewable projects, forcing the administration’s hand.
As the Washington Examiner reported:
“On Thursday, the department posted environmental review documents to move forward with two Gulf of Mexico offshore lease sales it canceled in May, setting it up to carry the sales out next year. It also started taking feedback on the possible auction of acreage in Wyoming and New Mexico. The announcements are a turning point for the leasing programs and come against the wishes of many Democrats and environmental groups, who want to restrict or end the program in service to slowing climate change.
President Joe Biden sought to overhaul the leasing programs coming into office, having promised on the campaign trail to end drilling and leasing on federal property, and ordered a ‘pause’ on all new leasing during his first week in office pending a comprehensive review of the program.”
That “promise” on the campaign trail was President Joe Biden pledging, “no more drilling on federal lands, no more drilling including offshore.”
A recent analysis by the Wall Street Journal showed that Pres. Biden largely fulfilled that pledge, reporting that sales had slowed “to a trickle:”
“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.” (emphasis added)
The administration has also shown hostility toward onshore leasing of federal lands, repeatedly missing deadlines to hold sales that are traditionally held quarterly, despite heavy interest from the industry.
This summer, when the administration finally held its first onshore lease sales, it brought in $22 million in bids, showing the strong demand for domestic production despite the Interior Department hiking the royalty rates by 50 percent and significantly cutting the amount of acreage offered.
While the Bureau of Land Management’s New Mexico and Wyoming offices announced Thursday that they are opening scoping periods for their states’ next onshore sales, notably, these are not slated to take place until May 2023, and will have the higher royalty and rental rates and minimum bid accounts directed in the Inflation Reduction Act.
Bottom Line: It took an act of Congress and a court injunction for the Biden administration to finally move on offshore and onshore leasing, though even this action is marred with delays and hindrances for the industry. As IPAA noted in its comments last week, continuing to obstruct domestic production on federal lands would only “further exacerbate many of the current negative trends and pricing issues our nation is already facing.” On the contrary, “continued American offshore exploration, development, and production will provide greater economic and energy security benefits to U.S. companies, workers, and consumers.”