EXPLAINER: Why is Biden halting federal oil and gas sales?
Written by Associated Press on March 24, 2021
By MATTHEW BROWN and MATTHEW DALY Associated Press
BILLINGS, Mont. (AP) — President Joe Biden shut down oil and gas lease sales from the nation’s vast public lands and waters in his first days in office, citing worries about climate change. Now his administration has to figure out what do with the multibillion-dollar program without crushing a significant sector of the U.S. economy — and while fending off sharp criticism from congressional Republicans and the oil industry.
The leasing ban is only temporary, although officials have declined to say how long it will last. And it’s unclear how much legal authority the government has to stop drilling on about 23 million acres (9 million hectares) previously leased to energy companies.
Here are some questions hanging over Biden’s Interior Department as it launches a months-long review of the government’s petroleum sales with a virtual forum Thursday.
WHY IS BIDEN TARGETING OIL AND GAS LEASE SALES?
Burning of oil, gas and coal from government-owned lands and waters is a top source of U.S. emissions, accounting for 24% of the nation’s greenhouse gases. Oil and gas account for the biggest chunk of human-caused fossil fuel emissions from federal lands following a drilling surge under former President Donald Trump.
Emission reductions from a permanent leasing ban would be relatively small — about 100 million tons (91 million metric tons) annually, or less than 1% of global fossil fuel emissions, according to a study by a nonprofit research group.
But environmentalists and others who want more aggressive action against climate change say a ban would nudge the economy in a new direction. Biden wants to substitute fossil fuel production and consumption with policies that promote renewable energy on public lands, such as wind and solar power.
“The federal government is a huge player here. The government has market power,” said attorney Max Sarinsky with New York University Law School’s Institute for Policy Integrity. “If you restrict the supply (of oil and gas), you alter the market and you create a better environment for more sustainable fuels.”
Lease sales and royalties companies pay on extracted oil and gas brought in more than $83 billion in revenue over the past decade.
Half the money from onshore drilling goes to the state where it occurred. Money from offshore drilling gets shared with states at a lesser rate and pays for a conservation fund used to preserve land nationwide.
WHAT’S BEEN DONE SO FAR?
The administration postponed lease sales in the Gulf of Mexico and in Wyoming, Colorado, Montana, and Utah. Biden earlier had suspended leasing in Alaska’s Arctic National Wildlife Refuge.
Interior officials say the fossil fuel program has failed to consider climate impacts and that irresponsible leasing practices carve up wildlife habitat, threaten Native American cultural and sacred sites and lock up public lands that could be used for recreation or conservation.
After what they call a “fire sale” of public energy reserves under Trump, Biden’s team argues that companies still have plenty of undeveloped leases — almost 14 million acres (6 million hectares) in western states and more than 9 million acres (3.6 million hectares) offshore. Companies also have about 7,700 unused drilling permits — enough for years.
Despite the moratorium, the Biden administration has continued to issue new permits for existing leases, including more than 200 in March, records show.
Environmentalists want that to stop, but an outright drilling ban would raise thorny legal issues. Companies could claim they have the right to extract oil and gas after spending years and millions of dollars to secure leases.
WHAT ARE BIDEN’S OPTIONS?
A ban on new leases means drilling would fade out as existing ones expire. It would be a heavy blow for western and Gulf Coast states that heavily depend on oil and gas revenue to pay for schools, roads and other services.
Another option is to increase royalty fees to reflect the “social cost” of climate change — damage from rising seas, drought, wildfires and other global warming impacts. That would keep revenue flowing and make it more expensive to drill on federal land, forcing companies to concentrate on the most profitable reserves and reducing emissions, though by less than a ban.
“If it’s not possible to have a carbon tax on all oil and gas extraction, at least we could do something akin to that on public lands,” said James Stock, a Harvard University economist and former member of the White House Council on Economic Advisers under Obama.
HOW MANY JOBS COULD BE LOST?
Economists say claims by industry groups and allies in Congress that a leasing ban would trigger massive job losses are greatly exaggerated.
An industry-promoted University of Wyoming study projected almost 300,000 jobs lost by 2025. But historical data on energy jobs suggest a much smaller impact of about 60,000 jobs, said Jeremy Weber, former chief energy economist for Trump’s White House Council of Economic Advisers and now a University of Pittsburgh associate professor.
That’s still a significant number as the U.S. economy recovers from job losses in the pandemic. And even limited job losses could profoundly affect local economies in Wyoming, New Mexico, and other oil-dependent states.
There’s also no guarantee such impacts would be offset by Biden’s promise to deliver millions of new green energy jobs, such as installing solar panels or helping with environmental cleanups of abandoned oil wells and coal mines.
Despite promises by renewable energy advocates, such jobs “don’t fill the bucket like oil and gas does,” said Jim Willox, a commissioner in Converse County, Wyoming, the state’s top crude producer and home to several new wind farms.
Aware of such concerns, Biden climate adviser Gina McCarthy met with executives from Exxon Mobil, Chevron, and other companies Monday to discuss ways to reduce greenhouse gas emissions. A White House statement said the administration “is not fighting the oil and gas sector” and wants to create jobs while addressing emissions.
American Petroleum Institute CEO Mike Sommers said independent forecasts show natural gas and oil will provide about half of the global energy mix for decades to come.
Interior Secretary Deb Haaland, sworn in last week as the first Native American to oversee the nation’s public lands and waters, will kick off Thursday’s forum, which will include representatives of industry, labor, conservationist groups, Indigenous people and others.
Haaland, a former two-term New Mexico congresswoman, said she wants to “strike the right balance” as Interior manages energy development while seeking to conserve public lands and address climate change.
An interim report to be completed this summer will outline recommendations for Interior and Congress to overhaul the fossil fuels program. A similar review of government coal sales during the Obama administration was to last three years but was canceled by Trump.
Daly reported from Washington, D.C.
On Twitter follow Matthew Brown: @MatthewBrownAP and Matthew Daly: @MatthewDalyWDC