Amid soaring gasoline prices and a global energy crisis, the U.S. will see the first onshore sales of oil and gas drilling leases under President Joe Biden.
The U.S. Department of the Interior says new leases will have around 50% higher royalty rates than before and cover less than a quarter of the land initially proposed. Most leases will be sold on federal land in the western half of the country.
The news is an about-turn for Biden after the president had suspended new leasing just a week after taking office in January 2021.
Where Are the New Oil and Gas Drilling Lands?
The government will lease some 225 square miles (583 square kilometers) of federal land across nine states: Wyoming, Colorado, Utah, New Mexico, Montana, Alabama, Nevada, North Dakota, and Oklahoma.
The Interior Department had initially looked at 646 parcels of land covering 733,000 acres. Following reviews with Tribes and communities and taking public interest into consideration, it was decided that some 173 lots on roughly 144,000 acres will be leased, an 80% reduction from the original acreage.
The federal government charges companies a royalty on oil and gas resources extracted from public lands. Winning bidders will see the new lease royalty rates jump from 12.5% to 18.75%, an increase of 50%.
According to Interior Department data, many states and private landowners already demand royalty rates higher than 12.5%, with some charging 20% or more. Texas has the highest rates between 20-25%, followed by Colorado (20%).
Biden’s Changing Approach to Oil and Gas
Biden’s government has promised to lower U.S. greenhouse emissions by at least 50% by 2030 compared to 2005 levels. The new leases could produce crude past that date, complicating the country’s emissions and energy picture and pledges.
The president is battling a global energy crisis precipitated by the conflict in Ukraine. Oil prices have risen sharply, with Russian oil supplies restricted by economic sanctions, resulting in soaring prices at the pumps. The AAA Gas Prices website lists an average gas price of more than $4 per gallon nationally, compared to an average of $2.87 per gallon at the same time last year.
In November 2021, the government held a massive offshore lease auction for drilling in the Gulf of Mexico. A federal court blocked the plan on the grounds that the administration broke environmental laws by not adequately considering the impact of the leases’ greenhouse gas emissions.
Biden also recently announced the release of one million barrels of oil per day from the country’s strategic reserves for up to six months.
Positive Spin on Leasing Not Enough for Industry
Interior Secretary Deb Haaland said: “How we manage our public lands and waters says everything about what we value as a nation.
“Today, we begin to reset how and what we consider to be the highest and best use of Americans’ resources for the benefit of all current and future generations.”
American Petroleum Institute (API) President and CEO Mike Sommers, speaking to the Economic Club of Florida, said: “If America doesn’t control its energy, our fate will be in the hands of others.
“Most everyone knows that the world needs oil and natural gas in a big way and will for decades or more to come; the only question is where that oil and gas is going to come from.”
New leases take several months or even years before they produce resources, so it remains unclear how the lease sale will immediately impact gasoline prices.
Return of Gas and Oil Shocks Environmental Groups
Environmental groups have criticized the United States’ swivel on oil and gas drilling, an industry that supports more than 11 million jobs nationwide.
Jeremy Nichols is the climate and energy program director for WildEarth Guardians. He said: “This is pure climate denial. While the Biden administration talks a good talk on climate action, the reality is, they’re in bed with the oil and gas industry.”
The Biden administration’s response to the global surge in oil prices has been to release millions of barrels of crude and sell leases for onshore drilling. The government is caught between two stools: trying to fulfill its environmental election promises while helping everyday citizens make ends meet.
Opinion writer: Tom Shearman
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