Update: just moments after we reported about the upcoming 60-day oil and gas leasing moratorium, Bloomberg blasted the following report which, all else equal, could have a dramatic impact on the US shale industry
- President Joe Biden is poised to suspend the sale of oil and gas leases on federal land, which accounts for about a tenth of U.S. supplies.
- The moratorium, which would also freeze coal leasing, is set to be unveiled along with a raft of other climate policies next week, according to the people, who asked for anonymity to discuss plans not yet public. The moratorium is separate from a 60-day leasing and permitting pause ordered Wednesday, and discussed below
The move would block the sale of new mining and drilling rights across some 700 million acres of federal land. It could also block offshore oil and gas leasing, though details are still being developed, some of the people said.
Federal lands and waters together accounted for 22% of total U.S. oil production and 12% of U.S. natural gas production in 2019, according to the Energy Information Administration. Onshore federal lands provide about 8% of the nation’s oil and 9% of its natural gas, according to the Bureau of Land Management. Data for 2020 are not yet available.
As Bloomberg adds, pausing new leases "would let the administration assesses their environmental impact and decide whether -- and how -- to restart selling them." The review could result in an end to leasing or to new limits on selling tracts and higher price tags to buy them.
So is a wholesale fracking ban coming? Don't ask us - everyone is confused about the president's stance on the issue.
One thing is clear: the moratorium would put the U.S. oil and gas industry squarely in the federal government’s crosshairs. Biden has called for phasing out fossil fuels over time in favor of cleaner power sources -- an overhaul of the U.S. energy mix that would have profound implications for the economy, touching everything from pipelines to power lines.
Biden's planned actions reflect his administration’s desire to rapidly implement strong climate policies -- not merely clear out Trump-era rules. Biden promised to end new oil and gas permitting on federal land during his presidential campaign.
Oil industry leaders and politicians from the Western U.S. have warned the move could harm some local economies where drilling and mining flourishes -- while crippling U.S. energy production to the detriment of American consumers. The Western Energy Alliance, which battled Obama-era rules targeting oil drilling, has vowed to immediately go to court to challenge any leasing ban.
“Blocking American companies from accessing our country’s natural resources is bad for American jobs, bad for state budgets and bad for national security. It also raises serious legal concerns,” said Anne Bradbury, chief executive of the American Exploration and Production Council.
Oil industry advocates argue that drilling blockades do nothing to stifle emissions -- just shift that crude production elsewhere. “The world is still going to need natural gas and oil under any scenario for a long time,” said Dan Naatz, senior vice president with the Independent Petroleum Association of America. “A leasing ban is just going to ship that production to Saudi Arabia, to Russia, where there are far less stringent environmental controls.”
There is on caveat: the biggest U.S. oil producers operating on federal land have years' worth of drilling permits and don't expect much to change in the short to medium term even once Biden moves to ban new oil and gas leasing on federal land and waters.
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In a reversal to the recent rally boosting the broader energy sector, US drillers stocks and the broader E&P complex tumbled after the Interior Department enacted a 60-day moratorium on issuing oil and gas leases that affects all federal lands, minerals, and waters, according to a secretarial order signed late Wednesday, Bloomberg reports noting that "the order, signed by acting Interior Secretary Scott de la Vega, applies to all of Interior’s bureaus, including the Bureau of Land Management and the Bureau of Ocean Energy Management."
During his presidential campaign, Joe Biden pledged to halt oil and gas leasing on federal lands as part of his climate plan. Wednesday’s order is temporary, however, and is separate from Biden’s moratorium on leasing activity in Alaska’s Arctic National Wildlife Refuge.
As Bloomberg adds, De la Vega’s order suspends each bureau’s authority to issue any onshore or offshore fossil fuel authorization, including a lease, lease extension, contract, or drilling permit.
The Interior Department is required by law to hold lease sales, and the order doesn’t actually ban them, said Kathleen Sgamma, president of the Western Energy Alliance, a trade group representing oil and gas companies operating on federal land.
De la Vega “has simply taken away the authority to lease and permit from BLM and put it on himself,” Sgamma said. “That does not relieve the InteriorSecretary from his obligation to lease and permit oil and natural gas on federal lands. He is legally vulnerable if he fails to meet that obligation.”
The report notes that upcoming gas lease sales are scheduled for Montana on March 23, Colorado for March 25, and Utah for March 29. This means that a Nevada oil and gas lease sale scheduled for March 9 is the only lease sale listed online at EnergyNet that would fall within the 60-day window. Unless it is extended, the moratorium will lift prior to other quarterly lease sales scheduled by the land bureau during the Trump administration.
SPDR S&P Oil & Gas Exploration & Production ETF (XOP) falls to session low:
Among the stocks hit the hardest, Devon was down 11%, MTDR dropped 10%, and EOG was 7% lower.