Oil and natural gas industry leaders and politicians railed against President Biden’s decision to freeze oil and gas lease sales on federal lands and waters through at least June during a Senate Energy and Natural Resources Committee hearing on Tuesday.
Government officials, meanwhile, defended the pause as a necessary step as they review the program to identify inefficiencies as well as the benefits of the program versus its impact on climate change.
“Retaining clarity for continuing operations is important while we aggressively work toward a collective transition plan,” said Occidental Petroleum Corp. CEO Vicki Hollub in her testimony. “To that end, administration action should provide regulatory certainty in the short- and long-term,” rather than a moratorium with no stated end date.
In remarks prepared for the hearing, Hollub noted that, like an increasing number of oil and gas companies, the Houston independent, better known as Oxy, is diversifying and committing to using carbon capture technology while working toward a goal of net-zero carbon dioxide (CO2) emissions by 2050.
However, Hollub said, oil and natural gas will play key roles in the transition between now and then, and drilling on federal land is an important component of the industry’s efforts to meet current energy needs.
Federal onshore drilling permits can take up to a year to earn approval, she explained, which requires operators like Oxy “to plan 18 months ahead of drilling operations. This long lead time means that as we evaluate our completions and geology, well design changes often result in the need to re-permit the same areas,” Hollub said. “Lack of clarity or permitting guidance can extend these times, often increasing the cost and the surface disturbance.”
Why Halt Lease Sales?
Hollub and others who spoke at the hearing argued that the Biden administration review could be conducted without halting lease sales. The moratorium not only complicates matters for operators but also costs state governments income they rely upon, said Western Energy Alliance President Kathleen Sgamma.
From a “small impact on federal lands, the oil and natural gas industry generates about $4.2 billion in federal royalties and leasing revenue” – which is shared with states – “while delivering 288.6 million bbl of oil and 3.4 Tcf of natural gas to meet Americans’ energy needs,” Sgamma said in her prepared remarks.
For every dollar spent managing the federal onshore program, Sgamma said the industry “returns 29 times that back to the federal government, an excellent return that funds education, public safety, and other vital health and human services in the West.”
Additionally, “we have saved consumers hundreds of billions of dollars by making energy more affordable,” Sgamma said.
Combating climate change emerged as a top priority for Biden early in his term, as he seeks to make the United States a leader on the world stage in efforts to reduce greenhouse gas emissions (GHG). During a global summit that he hosted last week, the president said the United States will target a 50-52% reduction in economy-wide GHG pollution by 2030 versus 2005 levels – hastening and doubling a prior U.S. commitment.
Biden also called on other leading countries to speed up their plans to minimize GHG in an effort to ward off what he described as disastrous environmental impacts from climate change if left unchecked. Officials from the Department of Interior’s Bureau of Land Management (BLM) echoed those concerns. The BLM oversees the federal oil and gas leasing program.
“We are at a crossroads as a nation and as a bureau,” said BLM’s Nada Wolff Culver, deputy director of policy and programs. “It’s incumbent on us to look forward and reimagine how we manage our public lands – adapting to the changing landscapes, climate, environment, and technology,” she said In testimony during the hearing Tuesday.
Culver said the BLM manages 37,496 federal oil and gas leases covering 26.6 million acres with nearly 96,100 wells. Federal onshore oil and gas production accounts for about 7% of domestically produced oil and 8% domestically produced natural gas, according to her testimony.
The Government Accountability Office (GAO) has identified the federal oil and gas programs as high risk from “fraud, waste, abuse and mismanagement,” she said. The GAO has also issued a series of other reports that recommended improvements affecting competitive leasing and permit processing, “and ensuring a fair return to the U.S. taxpayers.”
Under Biden’s pause, BLM “is currently undertaking a comprehensive review of our oil and gas program and engaging stakeholders to evaluate whether the program best serves the public interest,” Culver said.
While the current moratorium does not affect existing leases and is slated to run through the end of June, it could be extended.
Federal officials earlier this year suspended or delayed lease sales in the Gulf of Mexico, the Arctic National Wildlife Refuge in Alaska and in several Western states where federal energy leasing is managed by the BLM. This followed lawsuits from conservation groups that argued drilling causes environmental problems for both people and wildlife.
Thirteen states joined forces in March to file a lawsuit in a Louisiana federal court to compel the resumption of the sales. The states maintain that federal law requires regular sales. Wyoming officials filed a separate but similar federal lawsuit. Those court challenges are ongoing.
Wyoming Gov. Mark Gordon, a vocal critic of the leasing sales pause, testified before the Senate committee Tuesday. Total energy related revenues from public lands in Wyoming generated $457 million last fiscal year for the state, he said, with lease sales an important piece of the income pie.
“That income is our largest source of revenue for schools and other essential government programs,” Gordon said. He believes the federal pause will merely shift drilling elsewhere.
“Let me state what is obvious: This moratorium on leasing during the review discriminates against the people of Wyoming and every other western state with federal minerals,” Gordon said. “We are all disproportionately affected by the freeze. Oil and gas producing states where activity occurs mainly on private lands are now seeing an increase of interest from oil and gas producers.”
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