Digging Into the Administration's Lease Sale Announcement

Mark Green
Posted August 27, 2021

The Biden administration’s plan to hold its first ever oil and natural gas lease sales this year is a positive sign after it paused new leasing on federal lands and waters for nearly seven months. The question is whether this is a significant policy shift for the administration, which will be determined by what actually happens and how swiftly it occurs.

It must be remembered that it has been more than two months since the administration was ordered to lift its leasing pause by a federal judge, and the administration is continuing its appeal of the court’s ruling. Again, it’s fair to ask whether this week’s announcement is a policy change – or something else while the legal case continues?

The answers to that question and others are critically important to future oil and gas development in federally controlled reserves, much of which requires sizeable investment and lengthy planning. Kevin O’Scannlain, API vice president of Upstream Policy:

The Interior Department “must follow through on their promise and expeditiously put an end to the indefinite leasing pause, which a federal court, local communities, and policymakers on both sides of the aisle have urged. Once resumed, new lease sales must be conducted under fair and reasonable terms to keep federal leasing amenable to investment. We will continue to work with policymakers to shape sensible leasing terms that spur job creation and economic revenue, strengthen our national security and advance climate progress.”

Let’s break down O’Scannlain’s statement by posing follow-up questions for the administration:

Will lease sales be held in a timely manner?

Interior should end the leasing pause immediately by scheduling a sale as soon as possible. This would be a signal that the administration truly intends to resume leasing.

According to a court filing, Interior would start preparing for lease sales in the Gulf of Mexico, with the intention of holding an auction in October or November, reported Natural Gas Intelligence. Onshore, the Bureau of Land Management (BLM) plans to post a list of potential parcels for sale this month, with a public comment period to follow. Actual sales notices aren’t likely until December, with sales themselves not even occurring until 2022.

The Western Energy Alliance’s Kathleen Sgamma said the timeline “slow walks” a resumption of sales, NGI reported. Sgamma:

“BLM shouldn’t be doing additional scoping and analysis, which are just stalling tactics. The parcels originally slated for the 2021 first and second quarter sales are scoped and ready to put on the calendar. [The timeline] indicates one step forward and three steps back.”

Michael Zehr of the Consumer Energy Alliance to E&E News:

“While we are glad that the Biden Administration has announced a resumption of offshore lease sales as it is legally obligated to do, the delay has been far too long and there are too many questions unanswered by today’s announcement. It also creates unnecessary confusion, inconsistency and uncertainty for America’s energy producers.”

Will the way that federal leasing is resumed foster investment and development?

In addition to the timetable for a new lease sale, the sale’s terms must be amenable, or agreeable, to companies making the investments, so that they will buy leases and begin the process of developing them.

O’Scannlain called for “sensible” leasing terms and said industry will work with the administration to hammer those out to avoid terms and conditions that could discourage new investment. Yet, Bloomberg Government reports that Interior plans to consider energy development’s effect on climate, “possibly allowing officials to scuttle fossil fuel projects while still complying with court orders.”

That doesn’t sound very promising for meaningful leasing activity and the development of the energy Americans use every day. We need a reasonable, good-faith process to lease developable reserves, not merely the appearance of complying with the law, as ordered by the court.

Will the administration acknowledge the broad value-return of oil and gas?

The U.S. natural gas and oil industry supported 11.3 million U.S. jobs in 2019, jobs in all 50 states and the District of Columbia, and also nearly $1.7 trillion to U.S. gross domestic product or nearly 8% of the national total. Instead of hamstringing this economic engine, the administration should recognize our industry’s contributions as a significant national asset. A genuine move to end the federal leasing pause would signal this.

Federal onshore and offshore oil production is critically important to the U.S. economy and our nation’s energy security, accounting for 12.2 million barrels of oil per day in 2019 or 22% of U.S. total production.

Offshore production is vital to the economies of coastal states and individual communities, and is the primary funding source for the Land and Water Conservation Fund (LWCF). Since 1965 the LWCF has supplied billions of dollars for parks, conservation and recreation areas across all 50 states.

Safe, reliable energy powers the U.S. economy and every-day life. Natural gas and oil are America’s leading energy sources, and domestic production is critical to decreasing reliance on foreign suppliers and strengthening U.S. security.

It’s good the administration has taken this first step on federal leasing. Its next few steps will go a long way toward verifying a substantive policy shift needed to ensure that critical energy reserves are developed for the welfare and security of Americans.