Leading U.S. oil and gas trade group American Petroleum Institute (API) on Thursday urged the Biden administration to fully reinstate leasing on federal property, warning of environmental and economic impacts under a long-term ban.
Biden has paused via executive order (EO) the awarding of new leases amid a comprehensive review of the Interior Department (DOI) federal oil and gas program. Biden campaigned on a pledge to end new drilling on federal acreage both on land and offshore as part of a larger mandate to tackle climate change and decarbonize the economy.
However, a ban of this type could have the opposite effect, API’s Frank Macchiarola said Thursday during a DOI public forum on the program.
Citing analysis by energy consulting firm OnLocation Inc., Macchiarola said a long-term ban or substantial curtailment of federal leasing and development could cause coal use to increase 15% and carbon dioxide (CO2) emissions from the power sector to rise 5.5% by 2030.
A separate Obama-era study by the Bureau of Ocean Energy and Management found that U.S. greenhouse gas (GHG) emissions “would be little affected and could actually increase slightly in the absence of new offshore leasing due to increased foreign imports transported from overseas,” Macchiarola said, according to a transcript of his prepared remarks. “Such a result would directly conflict with our shared goal of reducing GHG emissions.”
He said the United States “is now the global leader in both energy production and emissions reductions, due in large measure to the innovation and vitality of the U.S. oil and natural gas industry.”
Macchiarola noted that API supports the ambitions of the United Nations (UN) Global Climate Agreement of 2015, aka the Paris Agreement, and that the United States can help other countries achieve those ambitions with policies that support liquefied natural gas exports.
Citing figures from the U.S. Energy Information Administration, he said energy-related CO2 emissions fell by 14.2% from 2005 to 2019, largely because of the displacement of coal-fired power generation with natural gas.
The hearing coincided with the publication of a climate action plan by API in which the group endorsed an economy-wide carbon price, direct regulation of methane emissions and other policies to promote industry-led solutions to climate change.
Macchiarola also rejected the common criticism that exploration and production (E&P) companies have been “stockpiling” federal leases and permits, saying this interpretation “is inaccurate and reflects a misunderstanding of the nature of oil and natural gas leasing.”
He explained that nonproducing leases are not inactive, and that companies acquire leases understanding that they won’t all be productive immediately, if ever. In the meantime, the government “receives large amounts from lease sale bonuses and annual rentals in return for providing the opportunity to explore for oil and natural gas.”
Federal lands and waters, he noted, accounted for 22% of U.S. oil production and 12.1% of natural gas output in 2019. “Continued access to these critical resources and the billions of dollars in revenues derived from them are essential to maintaining America’s energy security.”
Macchiarola said in 2019 alone, DOI disbursed nearly $12 billion from energy production on federal lands and waters to U.S. and state governments.
Citing the OnLocation study, he said that a long-term leasing and development ban would result in an increase of about 2 million b/d of oil imports and the elimination of nearly 1 million American jobs.
In related news, Alaska joined a multistate lawsuit challenging the EO on federal lease sales.
“This overreaching executive order has delayed a long-planned federal oil and gas lease sale in Alaska’s Cook Inlet,” said Alaska Attorney General Treg Taylor on Wednesday. “This case allows us to stand opposed to the wholesale prohibition on new federal leasing sought by the president, and serves as a statement to the new administration about the importance of the oil and gas industry to the state of Alaska.”
‘A Frank Conversation’
The hearing kicked off with remarks from Interior Secretary Deb Haaland. She is the first Native American Cabinet secretary in U.S. history and a former congresswoman from New Mexico, among the states most vulnerable to curbs on federal leasing and drilling.
About half of oil production from the New Mexico portion of the Permian Basin occurs on federal acreage, according to recent analysis by the Federal Reserve Bank of Dallas.
“We recognize oil, gas and coal energy from our public lands and ocean has helped to build our economy and power our nation,” Haaland said, according to a transcript. “Likewise, we, as a nation recognize the workers who have made sacrifices to ensure our country is powered.”
She added, “Fossil fuels will continue to play a major role in America for years to come, but too often, the extraction of resources has been rushed to meet the false urgency of political timetables, rather than with careful consideration of the impacts to the environment and future generations of Americans.
“During the past four years, the Trump administration offered vast swaths of our public lands and waters for drilling, prioritizing fossil fuel development above all other uses on public lands and waters.”
Haaland highlighted that the pause on federal lease sales does not impact permitting and development on valid existing leases. “Further, oil and gas companies have amassed thousands of permits to drill on 38 million acres of public lands and oceans – an area larger than the state of Iowa.”
The time has come, she said, for “a frank conversation” about how to overhaul management of public lands and waters in a sustainable way, and taking into account the interests of stakeholders such as indigenous tribes, and “coal and oil workers whose jobs and benefits are being cut…”
Over the coming days, she said, “We will explore ideas from leaders of both parties to rethink how we manage energy and minerals on our public lands.”
Following the hearing, analysts at ClearView Energy Partners LLC said they continued “to anticipate significant future constraints on federal oil and gas production.” Haaland and her agency heads “appeared skeptical — and in some cases critical — of current leasing, permitting and production activities.
“Other than Tribal stakeholders, who presented broadly mixed perspectives, most of the panelists who spoke…seemed to be either decisively for, or decisively against, the status quo.”
The ClearView team distinguished Thursday’s “mostly…political event” from likely upcoming formal proceedings, namely the revisions of resource management plans that govern onshore federal leasing and five-year ylans that govern offshore leasing on the Outer Continental Shelf.
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