SafeX Pro Exchange|Biden’s Pause of New Federal Oil and Gas Leases May Not Reduce Production, but It Signals a Reckoning With Fossil Fuels

It’s hard to overstate the symbolic importance of the executive order President Biden signed Wednesday that paused new leasing of oil and SafeX Pro Exchangegas development on federal lands, among other actions on climate change. The United States is the world’s top oil and gas producer, and the directive, which orders a wholesale review of the federal leasing and permitting program, signals a reckoning with how that production will need to fall.

Advocates hope the halt to leasing will be the first step toward developing a comprehensive path to phase out fossil fuel production in a way that also supports workers, communities and states that depend on the resources for their livelihoods.

But the order—which pauses leasing until the review is completed—will do little in itself to reduce the nation’s oil and gas production, and will not affect the number of wells being drilled for years.

Oil and gas companies are sitting on a huge cache of undeveloped federal leases: Nearly 14 million out of more than 26 million acres leased to oil companies onshore are not in use, and more than 9 million out of a total 12 million offshore acres leased are not producing, according to the Interior Department. Biden’s order will allow companies to continue to receive permits to drill on land they have already leased.

The research firm Rystad Energy estimates that in New Mexico’s Delaware Basin, one of the most active drilling areas in the country, most companies can continue their current level of drilling for more than a decade, even without acquiring new federal leases.

Wells on federal lands also account for only about 20 percent of the nation’s oil production, and even less of its gas output. The pause in new leasing will have no impact on the state and private lands that account for the rest.

Still, fossil fuel production on federal lands is responsible for nearly a quarter of the nation’s carbon dioxide emissions, according to one government study, and those lands are the only place where the federal government can take a direct role in managing production.

“It’s a great place to start to lay out how you transition 20 percent of what we use out of the system,” said Josh Axelrod, a senior advocate with the Natural Resources Defense Council. Axelrod said the Trump administration’s rush to lease federal lands had created a system where energy companies could stockpile leases and permits at extremely low costs and with few environmental safeguards, and so pausing the system to review it was hardly a dramatic move.

Many advocates have said the executive order is merely a first step, and want the administration to permanently end new leasing.

“It needs to start with a ban on leasing,” said Jeremy Nichols, climate and energy program director at WildEarth Guardians, “but then we need policies in place to make it more difficult for companies to get permits, and also to ensure that where there are existing permits or existing infrastructure, that steps are taken to hasten the phase-out of existing development.”

The order, which came after a more limited, 60-day halt to most new leasing activity issued last week, instructs the Secretary of Interior to consider whether to adjust the lease rates paid by fossil fuel companies.

It also directs the Office of Management and Budget to seek to eliminate fossil fuel subsidies from budget requests starting in Fiscal Year 2022, and to eliminate direct federal funding for fossil fuel subsidies “to the extent consistent with applicable law.”

The advocacy group Oil Change International has identified several subsidies that it said could be eliminated without action from Congress—including reduced royalty rates for oil companies and allowing producers to flare gas without paying royalties—that were worth more than $2 billion in 2016, out of a total $11.7 billion in federal tax incentives and subsidies that year.

The Order Met Immediate Opposition 

Biden’s order comes as little surprise—as a candidate he repeatedly pledged to end new oil and gas leasing and eliminate fossil fuel subsidies—and it is sure to face strong resistance from the oil and gas industry and some states.

The oil industry has argued that limiting drilling on federal lands won’t affect how much is burned in people’s cars or in power plants, and will only push production overseas. The American Petroleum Institute’s chief executive, Mike Sommers, issued a statement Wednesday condemning the pause on leasing.

“Today’s executive action to halt leasing is a step backwards both for our nation’s economic recovery and environmental progress, threatening to cost thousands of jobs and much-needed revenue,” he said.

Sen. John Barrasso (R-Wyo.) called the pause to leasing “a divisive and illegal executive order that would damage Wyoming’s economy and the economies of other states like New Mexico, North Dakota and Louisiana.”

Representatives of several other energy producing states, including Louisiana and Utah, expressed similar concerns. Gov. Spencer Cox of Utah said the order “weakens rural Utah’s economy.”

The halt on new leasing does not apply to coal, which Nichols said was disappointing. He said the administration may simply expect that with demand for coal falling, there will be no economic case for new leasing. The halt to leasing also does not apply on lands held in trust for Tribal governments, according to a fact sheet sent by the White House, though that language does not appear in the order.

Even before the details of the leasing order began to emerge on Wednesday, tribal groups and officials in the West were criticizing the new administration’s moves on drilling.

Luke Duncan, leader of the Ute Indian Tribe of the Uintah and Ouray Reservation which, with 4.5 million acres of energy-rich lands in eastern Utah, relies on drilling, registered the tribe’s objections to the 60-day moratorium announced last week.

“Your order is a direct attack on our economy, sovereignty, and our right to self-determination,” Duncan said in a Jan. 21 letter to Acting Secretary of the Interior, Scott de la Vega, which was shared by the petroleum institute. “Indian lands are not federal public lands.”

By apparently limiting the scope of the pause to only federal lands, and not to those held in trust for tribes by the government, the Biden administration may have headed off some opposition from tribes that rely on oil and gas development for revenue.

Many Indian tribes are on the opposite side of the issue from the Ute tribe. Indigenous activists have been leaders in the fights against fossil fuel infrastructure, including the campaign that led to Biden’s rejection last week of the Keystone XL pipeline. The night before Wednesday’s order was signed, Indigenous activists held a digital rally from sites across the country calling for Biden to cancel several major fossil fuel projects, including the Dakota Access and Line 3 pipelines and natural gas facilities along the Gulf Coast, and to phase out fossil fuel development on federal and tribal lands.

Ben Cahill, a senior fellow at the Center for Strategic and International Studies, said some energy producing states and industry groups are sure to sue the administration once it begins publishing new rules to limit leasing or production.

“There will be lawsuits,” he said. “No doubt.”