Zeroing In on the Risks of Not Holding Lease Sales

Kevin O'Scannlain
Posted May 20, 2022

Crude oil developed on federal lands and waters accounts for almost a quarter of all U.S. oil production – with the Gulf of Mexico alone supplying 15% of total production. Given these figures, consider the impact on American oil production from these numbers: zero successful federal offshore oil and natural gas lease sales in 2021, zero so far this year and zero are likely through at least October of next year.

America – the world’s leading producer of oil and natural gas – is on a dangerous path, one where it could go nearly three years without holding a single successful offshore lease sale, putting at risk American energy security and energy leadership.

Lease sales are the building blocks of America’s energy future. To continue to be energy secure, America must steadily develop new oil and natural gas resources to meet projected American and global oil demand growth while also accounting for the natural decline in the production of existing wells.

Put another way, imagine what would happen to the University of Georgia football team, the defending college football national champions, if the Bulldogs went two or three years without signing any new recruits. This would spell disaster on the football field in just a few seasons.

Similarly, failing to hold new lease sales – which launch a development process that can take seven to 10 years to reach actual production – could have dire consequences for America. (Again, recall that federal oil production is nearly 25% of the U.S. total.)

That alone is a major concern. Add to it the fact the Biden administration is well behind where it should be in planning future offshore leasing. The current five-year federal offshore leasing program is scheduled to expire June 30, and while the Interior Department says it will present a proposal for a new leasing program by that date, at least five months of review will follow before the plan can be finalized.

Under federal law, auctions of offshore drilling rights can only occur under an official, finalized five-year program. Interior’s current schedule would be the first time the U.S. has not announced a finalized leasing program before the existing program expires (Bloomberg Government subscriber content). Frank Macchiarola, API senior vice president for Policy, Economics and Regulatory Affairs:

The “announcement from the Department of the Interior confirms they are significantly behind in this multi-year process and will release a proposed program by June 30 – the day they should be finalizing it. The practical effect of this is that it is unlikely there will be offshore lease sales before the end of 2023.

“This is one more example of the disconnect between the administration’s political rhetoric and policy reality. As energy prices and geopolitical volatility continue to rise, we urge the administration to end the continued mixed signals on energy policy and remove regulatory hurdles that are hindering American producers’ ability to increase supply and meet the growing energy demand.”

A recent analysis by API and the National Ocean Industries Association showed how damaging a lapse in the five-year leasing program could be, potentially jeopardizing American energy security and costing thousands of jobs and billions in lost state and local revenues.

In the report, the stark numbers are projections, but they are brought closer to reality by the administration’s policies and actions. It’s a reality that does not support or strengthen American energy leadership.

The leasing program news, as Macchiarola said, adds to a list of instances where the administration has taken a step forward on American oil and natural gas only to follow with two steps backward. It’s no way to manage energy policy.