Energy

Biden Administration’s Offshore Oil Leasing Policy Will Crush American Energy Security, Experts Say

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• The Biden administration’s policy on offshore oil and gas drilling leasing has set U.S. energy security back and could lead to significant negative impacts down the line, experts said.
• “Unfortunately, this is a situation that creates uncertainty that drives investment away from the U.S. and to other parts of the world when it comes to energy production,” National Ocean Industries Association President Erik Milito told the Daily Caller News Foundation in an interview. “And it’s clear right now, we don’t want to be relying on other parts of the world.”
• The U.S., which consumes about 20 million barrels of oil per day, produced about 9.5 million barrels of oil per day at onshore sites and another 1.7 million at offshore sites mainly located in the Gulf of Mexico, according to 2021 federal data. 

The Biden administration’s policy on offshore oil and gas drilling leasing has set U.S. energy security back and could lead to significant negative impacts down the line, experts said.

Over the last 14 months, President Joe Biden’s Interior Department (DOI) has quietly taken steps to scale back long-term offshore and onshore drilling on public lands through a series of actions and inactions. Overall, the U.S. is set to again become a net importer of oil after briefly reaching net exporter status, government projections showed.

“Unfortunately, this is a situation that creates uncertainty that drives investment away from the U.S. and to other parts of the world when it comes to energy production,” National Ocean Industries Association President Erik Milito told the Daily Caller News Foundation in an interview. “And it’s clear right now, we don’t want to be relying on other parts of the world.”

“We have a strategic asset in the Gulf of Mexico that could be producing 700,000, maybe 800,000 more barrels per day or more if we had good policies in place,” he added. “But we don’t have the policy support in place right now which leaves us where we are globally and having to rely on outside source.”

The U.S., which consumes about 20 million barrels of oil per day, produced about 9.5 million barrels of oil per day at onshore sites and another 1.7 million at offshore sites mainly located in the Gulf of Mexico in 2021, according to federal data. The offshore sites, though, are generally more oil-rich than onshore sites with their production having come from just 14 rigs compared to the 464 land rigs used in 2021.

Russia’s ongoing military assault of Ukraine has caused uncertainty in global energy markets, leading to higher oil and gasoline prices around the world. Russia, which exports most of the energy it produces, is a major global supplier of crude oil.

In response to the crisis, U.S. fossil fuel groups urged the federal government to open the door to more domestic energy production and reduce reliance on foreign nations for oil and gas. But the White House has turned to Middle Eastern producers, begging them for more output. 

“If we want to get more from the Gulf, we’ve got to approve more leases,” Republican Louisiana Sen. Bill Cassidy told the DCNF during a media briefing last week. “And we’ve got to more speedily approve the permits, to drill more on the leases that have already been let.”

“The administration is slow-walking it all,” he added.

‘An Essential Element Of United States Foreign Policy’

“I would call it regulatory hostility,” Steve Pavlick, the head of policy at research firm Renaissance Macro, told the DCNF. “Biden’s been very clear going back to the campaign that he wants to discourage fossil fuel production much more aggressively.”

“If you’re a company and you’re looking to get a return on your investment, you don’t do that based on today’s oil price, you do that based on what the forward projections are,” said Pavlick, who previously served as deputy assistant secretary for legislative affairs at the Treasury Department.

But days after taking office in 2021, Biden signed an executive order pausing new oil and gas leases on federal lands and waters as part of his climate agenda.

“United States international engagement to address climate change — which has become a climate crisis — is more necessary and urgent than ever,” Biden wrote in the Jan. 27, 2021 order. “It is the policy of my Administration that climate considerations shall be an essential element of United States foreign policy and national security.”

In the same executive order, Biden ordered the DOI to issue a review on the federal leasing program, including its “potential climate impacts.” The department released its report in November, recommending that offshore leases should be hit with higher royalty rates “to monetarily account for the costs of carbon dioxide, methane, and nitrous oxide.”

The report stated that the federal oil and gas program fails to provide a fair return to taxpayers “even before factoring in the resulting climate-related costs.”

In a setback for the administration, a federal judge halted the president’s drilling lease pause in June. Still, the Biden administration has largely ignored the ruling, choosing not to hold mandated lease sales.

After the DOI was handed another loss on climate policy in February 2022, the administration said it would continue delaying or canceling leasing plans.

“Work surrounding public-facing rules, grants, leases, permits, and other projects has been delayed or stopped altogether so that agencies can assess whether and how they can proceed,” the administration wrote in a court filing.

‘Misguided’

Then, on Feb. 28, the administration announced it wouldn’t appeal a January ruling that nixed a major offshore lease sale. The sale, known as Lease Sale 257, of 308 tracts covering 1.7 million acres in the Gulf of Mexico generated more than $198.5 million in total bids from 33 companies, according to the Bureau of Ocean and Energy Management.

A major fossil fuel industry group, U.S. oil corporation Chevron and the State of Louisiana filed separate appeals in the case, arguing the decision was “misguided.” But in its filing declining to appeal the decision, the DOI said it maintained the authority not to award the leases purchased in Lease Sale 257 even if the appeals court reversed the lower court decision.

“Interior agrees with the other parties that, in the event this Court reverses the district court’s vacatur, the expiration of the five year program on June 30, 2022, does not prevent Interior from awarding leases pursuant to Lease Sale 257 after that date—although, as discussed herein and in Interior’s response to the district court’s January 20, 2022, Interior has the authority to decline to award the leases at that juncture,” the agency wrote in the filing.

The Biden administration has also failed to make progress on a new five-year leasing program to replace the current one which expires in late June 2022, according to a Congressional Research Service (CRS) report from December. The Outer Continental Shelf Lands Act of 1953 mandated that the DOI issue five-year plans detailing prospective offshore oil and gas lease sales.

“You’re taking future projected supply off the market, that’s not going to do anything to help in the near-term,” Pavlick told the DCNF when asked about the effects of not implementing a new five-year plan in time. “Again, if you were serious about trying to address the near-term challenges, there are a lot of things you could do to expedite the process.”

Developing the plans, which are necessary to outline all offshore lease sales within the stated five-year period, consists of months of lengthy legal and regulatory reviews. The administration isn’t on track to replace the current plan when it expires, The Washington Post reported.

“The Biden administration did not defend it in court,” Milito told the DCNF. “They were asked whether or not the lease sale should be invalidated or whether it should just go back to the agency to do some additional work on it based on the deficiencies that the court found. They basically said ‘we don’t care.'”

Milito added that environmental groups challenged the lease sale after the administration publicly acknowledged that its environmental review was lackluster.

“They highlighted in the press release the fact that they didn’t do a part of the environmental analysis,” he said. “So they announced to the world that we didn’t do this. What happened? The environmental groups saw that and they sued over that specific environmental analysis that they did not do.”

In addition, Biden’s DOI has dragged its feet on both Lease Sale 258, an Alaska sale, and Lease Sale 259, another Gulf of Mexico sale, that were scheduled for 2021 under the current five-year plan, the CRS report added. The government has shown no signs of moving ahead with Lease Sale 261 scheduled for 2022.

The most recent offshore lease sale was Lease Sale 256 which occurred in 2020 during the Trump administration.