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Biden Administration Navigates Offshore Oil Leasing Dilemma

Bloomberg
Total Views: 1464
September 28, 2023

By Jennifer A. Dlouhy and Jennifer Jacobs (Bloomberg) —

The Biden administration is charting plans to sell offshore oil drilling rights in the Gulf of Mexico over the next five years, despite objections from environmentalists who argue the move would be disastrous for the climate.

The Interior Department ruled out adopting an offshore oil leasing plan that completely blocked auctions through late 2028, according to people familiar with the deliberations who declined to be named because the measure is not yet public. However, only a low number of oil and gas lease sales will be included, some of the people said. That’s far from the 11 the agency proposed last year and it would be the lowest in history.

Oil industry advocates had pushed for a robust sale schedule to ensure steady production in the Gulf of Mexico, which provides roughly 15% of US crude output today. But environmentalists argue new leasing isn’t compatible with the urgent need to decarbonize by mid-century and would lock in oil development for decades — even as domestic demand shrinks.

The expected release of the plan Friday comes at a time of dwindling crude stockpiles and as oil futures approach $100 a barrel. However, it would take years for any new leases to lead to exploratory drilling, much less actual crude production.

A major factor in the administration’s decision is an Inflation Reduction Act provision blocking the Interior Department from issuing new offshore wind leases unless in the prior year it had held an oil lease sale putting at least 60 million acres up for grabs. The requirement developed by Senator Joe Manchin, a Democrat from West Virginia, was seen tying the agency’s hands and forcing at least one oil auction to allow future sales of wind rights in the Gulf of Maine and off the Oregon coast. 

White House and Interior Department spokespeople did not immediately respond to a request for comment. But Deputy Secretary of the Interior Tommy Beaudreau on Thursday told a Senate panel the five-year program “is definitely informed by the IRA and the connection the IRA makes between offshore oil and gas leasing and renewable energy leasing.” 

Offshore wind supporters have lobbied administration officials to keep offering new coastal tracts for development, arguing a pipeline of new opportunities is necessary to nurture a domestic supply chain, with manufacturers of turbine towers, foundations, blades and other gear. But environmentalists stressed that the Interior Department need only hold one or two oil sales to meet wind leasing targets.

“We’re in a climate crisis, and we’re not going to drill our way to less emissions,” said Valerie Cleland, a senior ocean advocate with the Natural Resources Defense Council. “If the administration’s primary goal is to maximize all future offshore wind leasing, the administration could do all of the offshore wind leasing in the pipeline with one — at most two — offshore oil and gas lease sales.”

On the campaign trail, President Joe Biden promised to combat climate change and ban new oil and gas permitting on public lands and waters. Activists argue the industry already has a substantial portfolio of untapped leases — about 9 million acres worth, according to government data.

“We know the solution is to shift away from fossil fuels,” said Jacqueline Savitz, chief policy officer for the conservation group Oceana. “And we know President Biden knows that. He promised he wasn’t going to sell any new leases, he’s not required to do this by law, and if he does propose new leases, he’s breaking that promise.”

But the oil industry has argued the recent approach — with generally twice-yearly sales of leases across a broad swath of the Gulf of Mexico — is the most efficient way to foster development necessary to meet the world’s energy needs. They stress the oil extracted from the Gulf is among the least carbon-intensive in the world. 

The typical pattern of two sales a year is an appropriate “frequency that allows the industry to step up and get the acreage they need in order to sustain production and build production,” said Erik Milito, head of the National Ocean Industries Association. 

Congress will have 60 days to review the blueprint and advance legislation seeking changes once the plan is released. 

The schedule is a legally required precursor to leasing offshore waters for oil development; this one is set to govern potential sales through late 2028. While a different, future administration could seek to alter course, the blueprint itself takes years to develop, defying quick pivots.

An earlier Biden administration proposal left the door open for as many as 11 auctions of offshore oil and gas leases — 10 in the Gulf of Mexico and one in Alaska’s Cook Inlet. The previous Obama-era plan, which expired June 30 of last year, also contained 11 sales. 

© 2023 Bloomberg L.P.

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