American Government Urged to Establish Robust Offshore Oil & Gas Leasing Program
Posted 03/08/2023 12:13
The oil and gas industry in the United States is calling on the Biden administration to finalize a new five-year offshore leasing program to strengthen U.S. energy security. Currently, the lack of a new program is seen as a significant lapse by the industry. In a letter addressed to President Joe Biden, 18 energy trade groups, including the American Petroleum Institute (API), urged the administration to create a program that includes the maximum number of lease sales and initiates pre-leasing work for sales to begin in 2024.
In July 2022, the Biden administration proposed a new five-year offshore oil and gas leasing program that limited the area considered for leasing to the Gulf of Mexico and Cook Inlet while excluding federal waters off the Atlantic and Pacific coasts. The plan also allowed for the possibility of holding zero lease sales, which was met with strong opposition from the oil and gas industry. On the other hand, climate activists welcomed the exclusion of lease sales in environmentally sensitive areas.
However, due to the pressure from both sides, the Biden administration found itself at a crossroads, and the previous five-year offshore leasing program expired without a new plan in place. The energy trade groups emphasized the importance of certainty and predictability provided by a robust five-year leasing program, with yearly lease sales to obtain new acres. They warned that without such a program, companies may explore opportunities elsewhere, leading to economic, energy, and environmental benefits being realized outside the U.S.
The letter highlighted the role of offshore production in American energy security, local economies along the Gulf coast, and conservation programs. Additionally, the trade groups emphasized the significance of offshore production in helping the Biden administration achieve its climate goals. A recent study by ICF showed that U.S. Gulf of Mexico production has a carbon intensity 46% lower than production in other parts of the world.
The success of emerging offshore energy segments, such as offshore wind and carbon capture and storage (CCS), is closely tied to the long-term success of the domestic offshore oil and gas sector, according to the letter. Many companies operating in offshore energy have roots in the oil and gas industry and are actively engaged in finding solutions and expanding into these promising energy avenues. However, the lack of a new offshore oil and gas leasing program introduces uncertainty that may hinder companies' ability to invest in these segments.
The call for a robust offshore leasing program comes after a recent Stipulated Stay agreement in Sierra Club v. National Marine Fisheries Service, which imposed restrictions on approximately 11 million acres in the U.S. Gulf of Mexico. The API and other industry associations criticized the agreement, arguing that it undermines legitimate conservation and habitat protection efforts and hampers America's energy independence.