Finalize a Robust Offshore Leasing Program for Energy Security, Clarity

Mark Green
Posted August 22, 2022

America needs a strong, forward-looking program for developing its offshore oil and natural gas – for energy security, economic growth and to increase global oil supply that will help put downward pressure on crude prices. A robust, five-year federal offshore leasing program is essential to this safe and responsible development.

America doesn’t have that now.

For the first time since a five-year federal offshore leasing program was required by law in 1980, the U.S. does not have an offshore leasing program in place. Another concerning factoid: The last time the U.S. went this long without an offshore lease sale was during the Kennedy administration. Both result from the current administration’s policy approach, which is a de facto moratorium on new federal offshore leasing.

In its first 17 months in office, the administration has held one offshore lease sale, which was held up by litigation and only recently reinstated through the Inflation Reduction Act (IRA). Instead, America’s energy policy has been marked by repeated attempts to get OPEC+ nations to produce more oil.

This kind of policy malpractice could put America’s energy future at risk. At a time when U.S. energy leadership has never been more important, the administration has undermined it by failing to advance safe and responsible offshore development.

While the IRA’s new taxes on oil and gas development could work against production, it also takes some positive steps, including reinstating the Gulf of Mexico lease sale that was held up in court. It also ties offshore oil and natural gas leasing to offshore wind leasing. But to see any future lease sales, the U.S. Interior Department must finalize a five-year federal offshore leasing program.

Again, America doesn’t have such a program now. It has the administration’s proposal – made after the previous program expired earlier this summer – that includes the option of holding zero lease sales in the future. That’s a non-starter for offshore projects costing billions of dollars, a non-starter for steady and necessary investment, and a non-starter for meeting America’s continuing energy needs.

There was other positive news last week in a federal court decision that effectively ordered the administration to follow federal law and end the offshore leasing moratorium. Frank Macchiarola, API senior vice president of Policy, Economics and Regulatory Affairs:

“This decision is a significant step toward ending the ongoing uncertainty over the future of energy development on federal lands and waters, and we urge the Biden administration to take immediate action to hold onshore lease sales and issue a final five-year program for federal offshore leasing that includes all of the proposed lease sales.”

Yet, the administration has the right to appeal the ruling, so stay tuned on that.

The broader, inescapable points are that America’s offshore energy policy remains unclear and unsettled – the opposite of what it should be – and that the lack of a firm, coherent offshore leasing program could harm America’s future.

Gulf of Mexico energy producers supply nearly 16% of America’s energy – and at one of the lowest carbon rates in the world. A lapse in the five-year leasing program could result in 885,000 fewer barrels of oil and natural gas per day from the Gulf by 2036 – a 33% decrease from where the country likely would be with a five-year leasing program in place. Huge numbers, huge impacts.

To avoid such consequences, the administration’s final five-year offshore leasing program should clearly affirm that there will be lease sales in the future as required by law and specifically maximize sales in the Gulf, with an option for a lease sale in the northern portion of Alaska’s Cook Inlet. It should eliminate the option of zero lease sales once and for all.

Safe development of America’s offshore oil and natural gas is integral to this country’s energy security. The five-year leasing program establishes a roadmap that producers use to plan, finance and carry through with projects that can take seven to 10 years to come online. It is critical to investor confidence as well.

Continuing down the administration’s current path – basically, framing federal offshore development as an open policy question – is the wrong path for American energy security and leadership. Federal law is clear on holding regular offshore lease sales, and Washington’s offshore leasing policy should be clear as well. Finalizing a five-year leasing program will bring that clarity.