Curtailed oil and natural gas drilling on federal property under a Joseph R. Biden Jr. presidency would mainly affect production of onshore natural gas and offshore oil, according to new analysis by Moody’s Investors Service.

federal lease oil and gas production

Onshore acreage accounted for 69% of natural gas output from federal leases in 2019, while the Gulf of Mexico (GOM) supplied 64% of oil produced on federal property, said John Thieroff, senior analyst for the Moody’s oil and gas team, in a note published Tuesday.

Federal leases accounted for more than 20% of the country’s combined oil and gas supply for the full year.

“The mix of onshore producers is much broader than offshore, with major oil companies operating alongside such independent exploration and production [E&P] companies as EOG Resources Inc., Concho Resources Inc. and Devon Energy Corp.,” Thieroff said.

He added, “Gas production from onshore federal leases is heavily concentrated in Wyoming, New Mexico and Colorado, which together accounted for almost 90% of the 2019 total.”

Biden has vowed to end new offshore oil and gas leases, along with new drilling on federal lands. However, he said last month that hydraulic fracturing must continue for the time being in order to facilitate the energy transition, quashing rumors that he would ban the drilling technique.

Biden also has promised to put the United States on a path to a carbon emissions-free electric power sector by 2035, and to rejoin the United Nations global climate agreement, aka the Paris Agreement.

Companies exploring for oil and gas on federal leases should expect to see the greatest immediate impact among industry players if Biden wins, Thieroff said.

“The Biden policy would ban future permitting in federal land and waters and seek to modify royalties to account for climate costs,” he said, noting that federal leases accounted for 21% of all domestic oil production and 13% of domestic gas production in 2019.

“A central plank of Biden’s environmental policy is rejoining the Paris Agreement, which he has said he would do immediately upon taking office,” Thieroff said. “While there would be no instant effect for energy companies, the recommitment would likely lead to greater government efforts to contain methane emissions on new and existing oil and gas operations, reduce flaring, accelerate investment in clean fuels, and renew a focus on fuel efficiency.”

Thieroff added that Biden’s plan for an emissions-free power sector would, if successful, “dampen U.S. demand for natural gas considerably.”

In addition to their vulnerability to a federal drilling ban, E&P companies in the western United States also face multiple challenges on the regulatory and legal fronts.

Colorado and New Mexico, which have seen a surge in oil and gas output over the last decade or so, plan to continue strengthening environmental regulations on the sector in order to address the climate change crisis.

Wyoming and Montana, meanwhile, have been at the center of legal wrangling over issues such as the Keystone XL crude oil pipeline and protection of the sage grouse.

Potentially complicating matters further, a federal judge in Montana ruled last month that William Perry Pendley, the acting director of the U.S. Interior Department’s Bureau of Land Management (BLM), had served illegally for more than a year and blocked him from continuing in the position.

BLM oversees onshore oil and gas leasing on federally owned tracts.

The potential reelection of President Trump, meanwhile, would mean a continuation of the status quo for oil and gas, Thieroff said.

He noted that the Environmental Protection Agency under Trump “has pursued a variety of policies favorable to industry, including loosening methane regulations for oil and gas producers and suing to attempt to eliminate California’s ability to set its own, more stringent fuel efficiency standards for automobiles.”