President Biden’s acting Interior Secretary, Scott de la Vega, issued an order preventing staff from producing any new fossil fuel leases or permits without sign-off from a top political appointee, effectively freezing new oil, gas, and coal development on federal lands and waters for the next 60 days. Under a secretarial order dated January 20, only the acting secretary and a handful of other high-level officials can approve new oil and gas leases, bypassing the professionals. The order also prohibits agency staff from approving new land transfers or resource management plans, ignoring these science-based documents. The order does not stop companies from drilling or other existing ongoing operations under leases the government has already sold, according to the Interior Department. During the 60-day pause, the Biden administration will review the legal and policy implications of the federal minerals leasing program.
In addition, Biden stopped oil- and natural-gas-leasing activities in the Arctic National Wildlife Refuge (ANWR) with an executive order signed on January 20, his first day in the Oval Office. Leasing in the refuge is required under a law passed by Congress and signed by President Trump in 2017. The first ANWR lease sale took place on January 6, 2021. From that lease sale, nine 10-year drilling leases have been issued on 440,000 acres of ANWR.
Biden wants to end new drilling on federal lands as part of his transition to renewable energy, with the goal of making the nation carbon neutral by 2050 and the generating sector carbon neutral by 2035, a full 10 years prior to California’s target, which has already caused supply disruptions in the state.
Despite oil producers slashing budgets due to the lockdowns from the coronavirus pandemic, major companies have been acquiring enough permits to keep pumping through Biden’s upcoming term realizing that the nation will still need oil and gas for many years into the future. Under President Trump, crude production from federal and tribal lands and waters increased sharply, topping a billion barrels in 2019, which was almost a third higher than the last year of the Obama administration.
Federal lands account for about 22 percent of U.S. oil production, 12 percent of U.S. natural gas production and 40 percent of U.S. coal production. When the Obama Administration slowed oil and gas permitting on federal land, drilling and exploration shifted to private land, where regulation was less onerous. Under President Trump, the federal government offered more than 100 million acres in onshore and offshore leases to drilling in a U.S. federal mineral estate that totals 2.46 billion acres.
State Impact
Blocking American companies from accessing our country’s natural resources is bad for American jobs, bad for state budgets, and bad for energy security. Hydraulic fracturing in shale basins occurs in large part on federal land in western states, and requires new leases and investment. Lawmakers in Western states such as Colorado, Montana, and New Mexico view drilling on federal lands as a source of good, high-paying local jobs and revenue for schools and other local programs. In many rural areas where activities take place, these are exceptionally good jobs and provide much of the foundation of the local economies.
Federal land accounts for over half of New Mexico’s oil production and 66.8 percent of its natural gas production. In Colorado, federal land accounts for 41.6 percent of its natural gas production; in Utah, 63.2 percent and in Wyoming, 92.1 percent. A federal leasing ban would cut about 18,000 good-paying jobs in Colorado, 33,000 in Wyoming and 62,000 in New Mexico by 2022. It will also hurt oil and gas companies in Texas, who drill heavily in the Gulf of Mexico and on federal lands in the western United States.
States and Tribes would also lose hundreds of millions of dollars of mineral royalties that are shared by the federal government. For example, in fiscal year 2019, oil and gas revenues generated $11.69 billion, with States receiving $2.44 billion and American Indian Tribes over $1 billion. In New Mexico, oil and gas revenue accounts for 20 percent of its budget. The New Mexico Oil & Gas Association indicated that restricting oil and gas development risks the loss of $800 million in support for the state’s public schools, first responders, and healthcare services. Downstream suppliers like fracking sand mines in Wisconsin and steel manufacturers in Pennsylvania would also be hurt.
Challenges to a Long-Term Ban
Biden, who pledged to halt new drilling within federal lands and waters during the campaign, may seek to extend the ban over the long-term or make it permanent, which, according to some legal opinions, could require congressional approval. Because existing laws mandate periodic auctions of drilling rights, any attempt at a long-term ban can be challenged in court by drillers and state attorneys general.
Conclusion
Biden’s 60-day ban on providing leases and permits for drilling on federal lands is a threat to the economy and will increase U.S. reliance on foreign energy from countries that have lower environmental standards. Reducing supplies of oil and gas will also affect prices for consumers. While existing oil and gas wells can continue to operate, a long-term or permanent ban would put oil companies on federal lands and in the Gulf of Mexico on a ticking clock and eventually reduce U.S. oil production and the investment in new projects that creates good-paying jobs. And, if supply disruptions are a result and are significant, it will raise prices for American energy.
