Course Correction: Federal Oil & Gas Leasing Needs Fixing
Courtesy of NRDC
By Joshua Axelrod
With research and writing from Aaron Rosenbluth and Diane Sanchez.
Industry Already Leases Tens of Millions of Acres of Federal Lands
President Biden’s executive order focused on climate change is forward-looking. Among many actions spanning the entire federal government, the order places a pause — not a ban — on new oil and gas leases. It applies to actions not yet taken, and in most cases, not even planned.
Oil and gas companies have 26 million acres of leases on federal public lands on their ledgers and baked into their long-term plans. Of these, 50 percent have never been drilled. Offshore, oil and gas producers lease an additional 12 million acres of federally managed oceans, but only 20 percent of that acreage has any drilling. That is 38 million acres leased — an area the size of Georgia — with 15 million acres currently being drilled — an area slightly larger than West Virginia.
Did President Biden’s order affect these leases or ban drilling of them? No.
In fact, analysis of the timeline for drilling federal oil and gas leases suggests that, despite claims of immediate and severe job losses, the industry is likely sitting on up to a 10-year cushion of unused leases and drilling permits. As discussed below, demand trends driven by the science of climate change are clear that we must cut carbon pollution from fossil fuels in half over the next decade — a shift that will require accelerating the transition of our energy and transportation systems away from fossil fuel. Which means, of course, that industry’s current stockpile of excess leases and drilling permits is likely to leave it with access to more oil than it will ever have economic reason to produce.
Onshore Federal Leasing Mostly Affects a Handful of States …
Most federal oil and gas leasing takes place in just four states: Wyoming, New Mexico, Utah, and Colorado. In fact, those states plus six more — Arizona, California, Idaho, Montana, Nevada, and Oregon — account for 80 percent of the onshore acres the federal government leases nationally.
… And Offshore as Well
Offshore oil and gas leasing takes place almost completely off the coasts of Texas, Louisiana, and Mississippi. A small number of additional leases exist off the coast of Southern California and the south and north coasts of Alaska.
Public Lands Contribute a Small Sliver to Overall U.S. Oil and Gas Production
Domestic oil and gas drilling in the U.S. has surged over the past decade, even as U.S. consumption has flatlined or declined. The surge in drilling is about chasing industry profits, not serving consumer demand. And it’s certainly not about energy security.
Oil and gas production on federal lands and waters currently stands at 2.9 million barrels/day (bpd) of oil and 12.5 billion cubic feet of gas/day. Nationally, these volumes represent 23.6 percent of daily oil production (national total = 12.2 million bpd in 2019) and 11.2 percent of daily gas production (national total = 111.5 billion cubic feet/day in 2019). Over the past decade, the share of overall U.S. production coming from federal lands and waters has declined.
In other words, most U.S. oil and gas production takes place on state and private lands. That production goes forward, unimpeded by the pause on federal oil and gas leasing.
America Has One Million Producing Oil and Gas Wells — 90 Percent Aren’t Federal
The vast majority of leasing, drilling, and production happens on private and state lands.
Even though slightly more than 20 percent of U.S. oil production and slightly more than 10 percent of U.S. gas production comes from leased public lands and federally managed oceans, the location of oil and gas wells clarifies just how much oil and gas production in this country is tied to decisions made on these private and state lands.
Currently, there are 100,000 “producible and service” well bores located on federal oil and gas leases. That seems like a huge number, but it pales in comparison to the nearly 1 million oil and gas wells currently producing across the U.S., 900,000 of which are on state and private lands.
Again: a pause on new oil and gas leases will have limited impacts on U.S. oil and gas production because nearly all of it is produced by non-federal wells and ongoing production from wells on federal lands and waters are unaffected.
Industry Is Worried About Profits, Not Energy Security
Back in 2015, a longstanding ban on crude oil exports was lifted, essentially allowing U.S. oil companies to begin exporting U.S. oil abroad in significant volumes for the first time in 40 years. The effect was dramatic and predictable. Since 2015, exports of U.S. crude oil have increased by nearly 700 percent from less than 500,000 bpd to nearly 3.2 million bpd in 2020. The change is all about profits: with the export ban lifted, Big Oil gets the profits, our overseas rivals get the fuel, and our families and communities get the hazard and harm. That’s not putting America first. It’s putting polluter profits first–and putting the rest of us as risk.
Meanwhile, energy security is just a bogeyman industry uses to scare consumers. Each day, we export more than all of the oil produced from on- and offshore federal leases. And, though imports of oil have fallen, the bulk of the annual decrease took place years before the U.S. began exporting significant volumes of oil abroad. In other words, even before we began flooding the world with our oil and gas, we were already importing less than we once had. The “energy security” argument is just a ruse to scare you.
If U.S. access to sufficient supplies of oil and gas were truly at risk, the U.S. industry could easily meet gaps in supply by simply ending exports. Indeed, based on the current mix of domestic production and foreign imports, U.S. producers could meet U.S. demand mix without any production from federal oil and gas leases.
It’s Not the Leasing Pause that Threatens Jobs of Fossil Fuel Workers
Oil and gas companies are trying to blame President Biden for a long-term industry shift in employment that, not surprisingly, has everything to do with maximizing profits and minimizing costs. They should be ashamed of themselves.
The industry has been shedding jobs for decades, despite record-breaking sales at home and abroad. Even when you throw in coal mining, fossil fuel production today employs 1.3 million people nationwide, half as many as in 1982, despite a 42 percent increase in oil sales.
This is a big problem for communities the industry spawned at its outset who, in most cases, remain economically dependent on oil and gas drilling. Not only have their fortunes been tied to booms and busts continually, but they also bear the brunt of the many social and environmental harms that flow from oil and gas extraction. And now, as the world’s transition to clean energy accelerates, there is great risk and a palpable fear that oil and gas dependent communities could be left behind.
It is time for a rational dialogue about the changes already underway as part of this transition and what it will mean for real people living and working near today’s oil and gas facilities. But oil and gas industry leaders, with their misdirection and inflammatory rhetoric, continually derail meaningful progress. Communities and workers must be empowered as stakeholders and shapers of an energy transition that leaves resilient communities with more stable and prosperous economies in its wake.
Sustainable Jobs of the Future Will Come from Diversified Economies
Though progress is slower than it should be, the global consensus remains that keeping average global temperature increases below 2 degree Celsius — and ideally below 1.5 degrees Celsius — is imperative for the long-term survival of Earth’s biosphere as we know it. That means human-caused emissions need to fall sharply over the next few decades, and any number of models indicate a steep, sustained, and permanent drop in oil and gas demand. NRDC modeling, shown below, indicates just how dramatic these changes will be. U.S. production, absent significant reductions, will seriously outstrip U.S. demand after 2030.
As a variety of factors drive this decrease in demand, jobs in other sectors are growing in a way that the oil and gas industry has not seen for nearly half a century. Jobs in renewable energy, energy efficiency, and energy storage, for example, have grown year over year and employ nearly three times as many people as fossil fuel production. While not every worker from the oil fields is going to end up working in clean energy, the fact is that there is a real opportunity for new, good-paying jobs in the industry. Not only is job growth in clean energy — which includes everything from solar panel installation to advanced manufacturing — outpacing national trends, but the skills of oil patch workers can easily be transferred. What’s more, Congress has now spent years crafting legislation to provide job training and other economic supports to ensure workers don’t get left behind.
But guess who opposes any attempt to provide a helping hand to oil and gas workers? Oil and gas companies and their corporate lobbyists.
And clean energy jobs are not the only drivers of growth. Indeed, across the West, and in many of the states with significant amounts of federal oil and gas leasing, access to public lands and the recreation activities they support are driving mini migrations that are creating job growth and higher incomes. This creates an interesting tension, as the very drivers of this growth can be at odds with oil and gas drilling, which often leads to degradation of lands and restricting public access and use.
This System Is Long Overdue for Reform
The oil and gas industry is trying its hardest to sound like it is fighting a noble battle on behalf of its workforce and American consumers, but that’s a façade. President Biden paused federal oil and gas leasing not just to address climate change, but also in response to calls for reform of the federal leasing system. Since 2011, the Government Accountability Office has flagged numerous problems with the oil and gas leasing program in the areas of bonding, noncompetitive leasing, fiscal management, inspection and enforcement, and lease suspensions.
These problems are growing, and creating profound issues. Insufficient bonding is leading to an abandoned well crisis that could leave many western states on the hook for billions of dollars of cleanup. Noncompetitive leasing is allowing companies to lock up public lands for $1.50 per acre, with little evidence to suggest these areas will ever produce a dime of oil or gas. Meanwhile, royalty rates — the amount companies “pay” taxpayers for the right to drill for publicly-owned resources — haven’t risen in decades, even as fees for production from state lands have.And this is by no means an exhaustive list of issues — it simply points to the fact that U.S. taxpayers are unwittingly providing numerous handouts to the oil and gas industry, which, in turn, is leaving behind billions of dollars of cleanup costs that it has no intention of covering.
A suite of bills in Congress have been introduced to reform each of these issues. But guess what? Industry isn’t about to jump in and show its support.
That begs the question: why is industry resisting reform of this broken system? If it wants the social license from American taxpayers to extract public resources, doesn’t the public have the right to expect honest, fair, and responsible behavior from the industry granted access to resources all Americans, technically, own?
Change Is Here, It’s Time to Act Like It
The dramatic shifts in energy production and economic policy that are changing today’s energy playing field are real and permanent. It’s time to recognize that fact and stop pretending that we can tread water and ignore what’s going on. Oil and gas workers deserve an honest conversation about their futures and the ways policymakers can ensure they don’t get left behind. In the next decade, many, if not most, will almost certainly move to new industries as oil and gas demand declines on a global scale, and that decline is essential for the health and well-being of all of us. The good news: there’s a lot of job growth potential in a lot of industries. The bad: fossil fuels do not offer growth potential, and haven’t for some time.
We need a serious, forward-looking dialogue, but industry leaders are stuck arguing that western America’s only hope is to continue pinning its future to a boom and bust industry heading toward its sunset. The real moment of urgency is acting to confront the global climate emergency and reforming a very broken leasing system. It is absurd for industry to suggest that President Biden doesn’t recognize the need to support families and communities dependent on oil and gas jobs and revenues. The federal oil and gas leasing pause is part of an executive order that is all about job creation, economic diversification, and long-term economic growth. It is a bold look at a better future for this country, its workers, and the world.
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