Strengthen U.S. Energy Security, Expedite Approval of New Offshore Leasing Program
Posted May 13, 2022
News: Late Wednesday night, the Department of the Interior confirmed it will not hold several traditionally mandated oil and natural gas lease sales in the Gulf of Mexico and off the coast of Alaska. The announcement, ironically, occurred a day after President Biden continued his call for more oil production in an effort to increase supply and put downward pressure on consumer costs. It also came as DOI officials continue to slow-walk the new five-year offshore leasing program, which is legally mandated, for the Gulf of Mexico. The current program expires June 30.
Quotable: “Unfortunately, this is becoming a pattern. The administration talks about the need for more supply and acts to restrict it. As geopolitical volatility and global energy prices continue to rise, we again urge the administration to end the uncertainty and immediately act on a new five-year program for federal offshore leasing.” – Frank Macchiarola, API senior vice president for Policy, Economics and Regulatory Affairs
Key Takeaway: With inflation surging and energy costs high, some in Congress remain focused on making already-debunked “price-gouging” arguments, which President Biden himself has contradicted – pointing instead to Putin’s war in Ukraine and demand returning from the pandemic as the two primary reasons for economic duress. The government needs to get on the same page at the very least. To climb out of the hole and provide relief for consumers and businesses, it’s past time for Congress and the Biden administration to recognize the value of U.S. energy leadership, driven by American natural gas and oil.
Further Background: Since 1980, the secretary of the Interior has been legally required to prepare and maintain a five-year offshore leasing program to best meet national energy needs for the upcoming five-year period, including a schedule of oil and natural gas lease sales and details on the size, timing and location of proposed leasing activity.
- The next five-year offshore leasing program must be in place by July 1, 2022, as the current program is scheduled to expire on June 30.
- During Interior Secretary Deb Haaland’s recent testimony before the House Appropriations energy subcommittee hearing, it was noted that the Department of the Interior has no immediate plans to hold new offshore oil and natural gas lease sales or release a new five-year offshore leasing program. There will be no opportunities to obtain new leases for federal offshore development and production without a new five-year offshore leasing program in place.
- Also of note, DOI declined to defend its own successful Lease Sale 257 last fall, which generated millions of dollars to the U.S. Treasury and would have created new prolific areas of new production opportunity.
Where We’re Headed: API and National Ocean Industries Association (NOIA) released a recent analysis explaining how a lapse in the five-year leasing program could threaten American energy security, cost thousands of jobs, and jeopardize billions in state and local revenues.
- Supply at Stake: With a five-year offshore leasing program, the Gulf of Mexico is projected to produce an average of 2.6 million barrels per day of oil and natural gas from 2022–2040. A delay in the program could mean nearly 500,000 barrels per day less over that time period.
- Jobs in Jeopardy: 370,000 American jobs are supported by Gulf of Mexico offshore production. Nearly 60,000 of those could be lost without a five-year offshore leasing program. Direct jobs supporting the offshore oil and gas industry pay on average $69,650. That is 29% higher than the national average salary.
- Revenue at Risk: On average, $1.5 billion per year in government revenue could be lost with reduced offshore production. That is revenue that could be used for public education, infrastructure, conservation projects, coastal restoration and hurricane protection programs.
Bottom Line: Developing America’s natural gas and oil resources from the Gulf of Mexico is a key part of establishing energy security at home and assisting our allies overseas. The administration should capitalize on available resources and leverage them into momentum to help ensure America remains the world’s largest oil and gas producer – a strategic asset and strength for all involved. For more information on the consequences of not having the next five-year offshore leasing program developed on time, please click here for a copy of the API/NOIA report, or click here for a fact sheet.
About The Author
Lem Smith is API’s vice president for Federal Relations. Lem joined API in February 2020 as vice president for Upstream Policy & Industry Operations. He previously served as a principal at Squire Patton Boggs, an international law and public-policy firm, where he advised private and public sector clients on federal and multi-state policy matters and provided counsel on communications strategies, campaign affairs and crises management. Previously, Lem was director, U.S. Government & Regulatory Affairs at Encana, and responsible for all aspects of U.S. government relations and regulatory policy matters at the state and federal levels. Prior to that, Lem was director of Government Relations for Kerr-McGee Corporation. Lem began his career on Capitol Hill, working for U.S. Senate Majority Leader Trent Lott, U.S. Rep. Roger Wicker (Mississippi) and the late U.S. Rep. Charlie Norwood (Georgia), where he negotiated key member priorities within the 2005 Energy Policy Act (EPAct). Lem is a graduate of the University of Mississippi.