Drilling Down on Federal Leasing Facts

Lem Smith
Posted March 24, 2022

API welcomed recent announcements that the Department of the Interior had resumed its planning for oil and gas development and that the Department of Energy had approved two new liquified natural gas (LNG) export permits. Similarly, comments by Energy Secretary Jennifer Granholm urging oil companies to produce “more right now, where and if you can” were encouraging – especially as Americans face inflation at home and help provide energy security abroad.

But other comments, even some by President Joe Biden, need a reality check. This month the President has denied that his policies were “holding back domestic energy production”; asserted that oil companies are sitting on 9,000 drilling permits; claimed that only a tiny fraction of oil comes from federal property; and said that mixed policy signals don’t chill investment in oil and gas as energy needs grow.

Below are some facts and realities to counter this misleading spin.

Spin: Policymakers Aren’t Holding Up Increased Production

Reality:

• Early Interference: The administration discouraged production of natural gas and oil starting with its first moments in power. On Day One, the President signed an executive order to impose a temporary moratorium on oil and gas leasing activity in the Arctic National Wildlife Refuge (ANWR); withdrew offshore areas in Arctic waters and the Bering Sea from oil and gas drilling; and revoked the permit for the Keystone XL pipeline.
• Obstacles Escalate: Days later, the administration acted to indefinitely pause all new oil and gas lease sales on federal lands and offshore waters, immediately restricting the industry’s opportunities to explore and invest in new areas.
• Unhelpful Rhetoric: Even where the administration hasn’t blocked federal leases, it has been an unwilling partner, openly admitting the sales are not aligned with their policies.

Spin: Only 10% of Oil Comes from Federal Land

Reality:

• Language Tricks: Note the administration’s misdirection here. The administration is highlighting this statistic to argue its restrictive policies would have a limited impact on total U.S. production. The smaller the percentage of leases on land (key word), the smaller the impact of their policies overall, right? In reality, federal natural gas and oil leasing occurs both onshore and offshore.
• The Truth: Oil production from federal lands and waters provides approximately 24% of total U.S. oil production. Additionally, natural gas production from federal lands and waters is approximately 11% of total U.S. natural gas production.
• Size and Scale: To put the data in perspective, if U.S. federal land/waters was treated as its own country, the 2.67 million barrels of oil it produced daily in 2019 would have made it the 11th largest daily oil producer in the world that year.

Spin: Oil Companies Have Stockpiled 9,000 ‘Unused’ Permits

Reality:

• Necessary Perspective: There are currently nearly 100,000 producing wells on federal lands, and the 9,000 permits awaiting a process to start exploration or future production are a small fraction of the overall federal well count.
• Lengthy Process: Wells and leases are not like faucets and spigots. It takes months for new wells to start producing and it can take more than five years for some fields to go from discovery to production, thanks in part to regulatory and legal hurdles along the way. For example, there are 4,621 permits to drill awaiting approval by the Department of the Interior’s Bureau of Land Management (BLM), and thousands of leases are held up in litigation by environmental groups.
• Higher Success Rate: Despite attempts to portray the industry as stockpiling unused permits, “a greater share of federal leases are producing oil and gas than any other time in the past two decades,” according to Bloomberg.
• Red Tape: Meanwhile, the chart below shows that, with a record percentage of onshore federal leases producing oil and gas, the Biden administration is slowing the pace of drilling permit approvals. The amount of permits approved by BLM for natural gas and oil wells in January plunged 85% compared to approvals in April 2020. Read more on leases here.

(Source: E&E News)

Spin: Mixed Policy Signals Don’t Chill Investments in Oil and Gas

Reality:

• Policy Matters: Like other sectors, the U.S. oil and gas industry is still recovering from pandemic production shocks, labor shortages and supply chain issues. Observers have noted a reduction in industry capital expenditures of about 25%. But since taking office, the administration has sent many negative signals to investors about oil and gas development. The uncertainty caused by federal policies has frozen investments, according to Goldman Sachs. And comments like those documented here from administration officials make clear they view such projects as avoidable or bad.

Despite restrictive policy actions outlined above, U.S. production is steadily increasing and on pace to set new total production records in 2023. America’s natural gas and oil producers have responded to threats to energy security in Europe and stand as willing partners with the Biden administration to put in place the pro-energy policies needed to increase the supplies that will alleviate costs.