The Biden Administration is finalizing the next five-year offshore leasing program, which has been delayed by several months already, creating yet another uncertainty for the U.S. oil industry which has had to grapple with numerous mixed messages from Washington since President Biden took office.
The previous five-year program expired in June 2022. The Biden Administration hasn’t yet published a final version of the 2023-2028 program, as it looks to balance between climate goals and the need to ensure some continued production activity in the largest U.S. offshore basin, the Gulf of Mexico, in a world where domestic energy resources are the best energy security tool a country could have.
The oil industry criticizes the Administration for the delay in the program and is concerned that environmental voices would prevail and severely limit the offshore leasing sales in the Gulf of Mexico.
Gulf of Mexico Importance For U.S. Energy Security
The Gulf of Mexico is America’s primary offshore source of oil and gas, generating about 97% of all oil and gas production on the U.S. Outer Continental Shelf. The Gulf of Mexico federal offshore oil production accounts for 15% of total U.S. crude oil production, while federal offshore natural gas production in the Gulf accounts for 5% of total U.S. dry production, per estimates from the Energy Information Administration (EIA). Moreover, around 47% of the total U.S. petroleum refining capacity is located along the U.S. Gulf Coast, as well as 51% of the total U.S. natural gas processing plant capacity.
The Gulf of Mexico, therefore, is very important for the U.S. – and global – energy supply. Uncertainties over future lease sales and developments could make some companies reconsider their plans for the primary U.S. offshore oil and gas location.
Administration Delays Five-Year Program Decision
Still, the Biden Administration is delaying the finalization of the 2023-2028 program. Most likely, the White House is considering how to reconcile the environmental and climate concerns of the “keep it in the ground” camp with the need to have homegrown energy resources to protect energy and national security, according to analysts.
The White House is probably trying to balance an equation of how much potential oil production it would have to lease to safely hit climate and clean energy goals, Kevin Book, managing director of ClearView Energy Partners, told E&E News’ Heather Richard.
By law, the Administration has to publish a five-year program. In the first plan for the new program, the Department of the Interior’s proposal “puts forward several options from no lease sales up to 11 lease sales over the next five years.” The plan removed from consideration the federal waters off the Atlantic and Pacific coasts while inviting public comment on 10 potential sales in the Gulf of Mexico and one in the Cook Inlet off south-central Alaska.
This week, the Bureau of Ocean Energy Management (BOEM) issued its Final Supplemental Environmental Impact Statement (EIS) for two upcoming Gulf of Mexico Outer Continental Shelf oil and gas lease sales, Lease Sale 259 and Lease Sale 261, to comply with the Inflation Reduction Act of 2022. The Inflation Reduction Act mandates Lease Sale 259 to be held no later than March 31, 2023, and Lease Sale 261 to be held no later than September 30, 2023.
President Biden, who campaigned on promises to end federal lease sales onshore and offshore, said, “No more drilling…there is no more drilling,” at a campaign rally in New York state just ahead of the mid-term elections in November when asked by a person in the crowd about drilling on federal land and in federal waters.
U.S. Oil & Gas Industry Calls For Clarity and Permitting Overhaul
The U.S. oil and gas industry is continuously calling for more clarity on future lease sales and for the Administration to stop frustrating the sector’s efforts to supply more American oil and gas resources instead of the U.S. having to rely on imports from countries like Saudi Arabia or Iraq, which have lower environmental standards in energy production than the U.S.
Just before the previous five-year offshore leasing program expired in June 2022, the American Petroleum Institute (API) and more than 80 trade groups wrote a letter to President Biden, urging the Administration to implement a new five-year program as soon as possible.
“If the door closes to new U.S. production, investment dollars will instead flow abroad to more active basins to the detriment of American workers, energy consumers, and the environment,” they said.
In a report published this week, API said that “through the Biden administration’s first 19 months in office, the U.S. Interior Department (DOI) leased fewer acres for drilling on federal lands and waters than any other administration in its first 19 months since the end of World War II, when the U.S. economy was a tiny fraction of what it is today.”
“DOI must issue a robust, final, five-year offshore leasing program for oil and natural gas that includes multiple leasing opportunities,” API said.
The top U.S. oil lobbying group also called for reforming the permitting process for energy infrastructure – “Congress should authorize major energy infrastructure projects as critical to the national interest, supporting energy production, processing and delivery.”
By Tsvetana Paraskova for Oilprice.com