Analysis: U.S. Energy Security, Jobs Impacted by Delaying Federal Offshore Leasing Program

Mark Green
Posted March 29, 2022

For more than a year API has warned that Biden administration energy policies could significantly impact America’s future energy security. We see some of those impacts in a new analysis projecting the consequences of one of those administration policies – delaying the Interior Department’s five-year oil and natural gas leasing program for the Gulf of Mexico and other federal waters.

The impacts are severe in terms of American energy security, as well as key losses in jobs, economic growth and government revenues. According to the analysis prepared by Energy and Industrial Advisory Partners for API and the National Ocean Industries Association, the potential impacts include:

• Nearly 500,000 barrels per day less of oil and natural gas from 2022-40 than otherwise would be projected from Gulf production with a five-year leasing program in place and on time.
• In 2036, lost Gulf production could result in 885,000 fewer barrels of oil and natural gas per day, a 33% decrease from where production would be if the next five-year leasing program is not delayed.
• Nearly 60,000 jobs supported by offshore production could be lost. This includes direct jobs supporting the offshore oil and gas industry that pay on average nearly $70,000 per year – 29% higher than the national average salary.
• $1.5 billion per year in government revenue could be lost with reduced offshore production. These revenues paid by industry could be used for education, infrastructure, conservation projects, hurricane protection and more.

These would represent serious setbacks for America’s energy security in years to come, as well as individual Americans and their families who would be impacted directly.

There’s no indication the Biden administration is building a new five-year offshore leasing program (which would include the Gulf of Mexico) to replace the one that is scheduled to expire this summer. The program blueprints where federal tracts could be offered for auction during the covered period, which oil and natural gas companies use to develop energy projects that take years to complete (seven to 10 years for offshore projects).

We’ve already gone through one year without a successful offshore lease sale, and Bloomberg Government reports that economic projections in the administration’s newly released budget proposal do not anticipate any Gulf lease sales through at least October of next year – a missed opportunity at a critical time for the nation.

Though the administration’s recent approvals of liquefied natural gas (LNG) projects and an LNG pact with Europe are welcome, the failure to plan for offshore development is troubling for America’s energy future. Frank Macchiarola, API senior vice president for Policy, Economics and Regulatory Affairs, during a press briefing:

“The administration’s rhetoric still stands in contrast to many of their policy actions. The Biden administration's lack of progress on offshore leasing is a clear example of the large gap between rhetoric and reality. The next five-year offshore leasing program must be in place by July 1, 2022, in order to avoid an unprecedented lapse in the program. Yet, the Department of the Interior is well behind schedule, and the new five-year program is unlikely to be implemented before the current one expires. Without a new program in place, there will be no new opportunities to obtain leases for federal offshore development, which represents 15% of all U.S. oil production and 2% of U.S. natural gas production. … A five-year program is one common-sense step the administration can take to restore certainty for American producers and send a message that America is open for energy investment.”

NOIA President Erik Milito said offshore oil and gas production in the Gulf has been a key to American energy security for decades:

“Promoting opportunities for increased U.S. oil and gas production will help fortify our national security, alleviate inflationary energy prices, reduce our dependence on foreign sources of energy, and secure our energy from highly regulated and lower emissions production sources here at home. The longer we go without being able to explore and develop new leases offshore, the longer we weaken a key, proven national strategic energy asset.”

Again, in recent weeks the administration has been sending positive messages about American oil and natural gas production. But in this area, “the administration has said one thing and done another,” Macchiarola said. He pointed to lost energy, jobs, capital spending and revenues to government if the administration continues down the current path in offshore policy. Macchiarola:

“It would be one thing if we were living in stable, secure times. But it's another when the rhetoric is so critical around an urgent matter of national security and the national security of our allies overseas. The American people are asking for relief from energy prices, and the European people need relief from the stranglehold that Putin has over them on energy. The United States can deliver on both of these. We just need a shift in policy from the Biden administration. In fact, all we need is for the Biden administration to act the same way that they speak.”