Offshore Leasing: The Time to Act is Now

The Biden Administration recently announced plans to ramp up shipments of U.S. liquified natural gas (LNG) to Europe to help reduce dependency on Russian natural gas. The White House also declared a long-term goal to work with the European Union to ensure stable demand for additional U.S. LNG until at least 2030 of approximately 50 bcm per year.

With these additional promises to help our allies overseas, uncertainty around domestic production has risen and there continues to be concerns that the Biden administration is not implementing enough actions at home.

Uncertainty about offshore oil and gas production is of particular concern, due to the fast-approaching deadline to implement the 5-year offshore leasing program, as revealed in a new analysis from the American Petroleum Institute (API) and the National Ocean Industries Association (NOIA).

The Department of the Interior (DOI) has yet to prepare a 5-year offshore leasing program, a requirement set in 1980, to replace the current program set to expire on July 1, 2022. The program details must include “a schedule of oil and gas lease sales and details on the size, timing and location of proposed leasing activity.” If this program is not prepared, there will be no opportunities to obtain new leases for federal offshore development in the Gulf of Mexico (GOM) over the next five years.

API and NOIA report that:

“A lapse in federal offshore leasing could jeopardize American energy security, cost thousands of jobs and billions in lost state and local revenues.”

The GOM oil and gas sector has served as a U.S. strategic asset for decades, enhancing national security and producing products with the lowest carbon intensity in the world, expressed NOIA President Erik Milito during a press call on March 29. API Senior Vice President of Policy, Economics and Regulatory Affairs Frank Macchiarola reiterated:

“Now more than ever, U.S. oil and natural gas development is critical for the nation’s long-term energy security and our national security, and offshore production plays a key role.”

Offshore energy production is vital to the U.S. economy and any delays in the 5-year program would have detrimental consequences, according to a study by Energy and Industrial Advisory Partners, including:

  • 60,000 lost jobs
  • $5 billion loss in U.S. GDP
  • $1.5 billion annual loss in government revenue

Without a 5-year offshore leasing program, the GOM will see a production decrease of more than 500,000 barrels per day – an amount Macchiarola said is comparable to that of the crude oil the United States is importing from Russia. This will impact the allocations to both the Land and Water Conservation Fund and the Historic Preservation Fund, which both heavily rely on revenue from offshore oil and natural gas production to support upkeep and maintenance across all 50 states. As The Federalist recently explained:

“The Land and Water Conservation Fund, which previously relied on variable appropriations, was given permanent funding of $900 million on an annual basis paid from oil and gas revenues.”

Greater Lafourche Port Commission Executive Director Chett Chiasson shared that offshore production substantially supports government services in Louisiana such as education and coastal and marsh restoration.

“Offshore energy is the primary economic generator for the Lafourche Parish community, supporting not just jobs, but also substantially funding the government services provided by the Parish, like after school programs, economic development assistance, public works and emergency preparedness…offshore energy production is vital to all of it.”

Further, if GOM oil and natural gas production is reduced, it does not mean that energy demand will decrease. Rather, as Energy in Depth has repeatedly said, the United States – despite being the most regulated energy industry in the world – will be forced to increase foreign imports from less environmentally friendly countries to meet continued energy demand, which is of high concern for Danos Owner and CEO Paul Danos:

“Ending or reducing lease sales in the Gulf of Mexico will increase carbon emissions, send jobs overseas, increase the cost of energy for Americans, and take away the largest source of funding to restore and protect our Louisiana coast.”

With geopolitical volatility and increasing energy prices, the last thing the United States needs is reduced GOM production. Without a 5-year offshore leasing program, Americans will lose jobs, environmental government projects will experience a loss of funding, and carbon emissions will rise. The DOI needs to act now to maintain offshore leasing and meet national energy needs.

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