Good News: Permitting … Uncertain News: Leasing
Posted July 15, 2021
As we await the Biden administration’s report on the federal natural gas and oil leasing program, let’s note the welcome news that oil and gas permitting approvals this year are on track to reach their highest levels since George W. Bush was president.
Permitting at that pace is good for near-term U.S. production, no question. In January, when the administration suspended new oil and gas leasing on federal lands and waters, it said permitting would continue, and it has. The country benefits from safe, responsible and robust domestic natural gas and oil production.
Americans shouldn’t conflate permitting and leasing. Drilling permits are issued when companies are ready to develop from acreages, onshore and offshore, previously leased from the federal government. Put another way, leases typically are secured years before development occurs. We’re seeing permits go through at a significant rate because investment and planning have been completed and acreages are ready to go into production. Permitting is about production that’s imminent; leases represent energy in the future.
That’s where Americans should be concerned. Future energy strengthens U.S. energy and national security. It’s the foundation for economic and job growth. The administration’s suspension of the federal leasing program, the indefinite pause we’re in right now, has thrown uncertainty over the future of federal onshore and offshore oil production, which in 2019 accounted for 22% of U.S. total production (12.2 million barrels per day).
That indefinite pause was studied by OnLocation for API to show the impacts of the administration’s moratorium on new federal leasing. The analysis looked at two scenarios – a moratorium lasting four years and one lasting eight years. Key assumptions:
- Drilling continues on current leases
- Production goes down as output on existing leases decline and the inventory of undrilled leases is used up
- An accumulation of impacts as long as the moratorium lasts
The analysis projected declining U.S. oil and gas production, increasing foreign imports of crude oil, lost jobs and economic output. It projected that reductions in natural gas production and available natural gas supply would lead to higher coal-fired power generation and associated carbon dioxide emissions. Other specific projections:
- Reduced U.S. energy production – A ban on new federal leasing for four years is projected to result in a decline of 1 million barrels of oil equivalent per day (MMBOE/D) in 2025. A ban for eight years is projected to result in a decline of 1.7 MMBOE/D.
- Increased foreign oil imports – Net imports of crude oil are projected to rise by 1 million barrels per day (MMB/D) by 2030, with increased payments to foreign suppliers.
- Lost jobs – Nearly 157,000 American jobs are projected to be eliminated in 2026 under a four-year leasing ban; nearly 340,000 American jobs eliminated in 2030.
- Decreased economic output – GDP cumulative decline is projected to total $400 billion (2018 dollars).
- Increased CO2 emissions from the power sector – Reductions in natural gas production and available natural gas supply are projected to lead to higher coal-fired electricity generation and associated CO2 emissions.
Again, we welcome the permitting news, yet the leasing question remains. More on that once the administration unveils its leasing report.
About The Author
Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Previously, Mark was a reporter, copy editor and sports editor at an assortment of newspapers. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela have two grown children and six grandchildren.
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