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offshore rig
August 2023 Exclusive Story

Energy Trade Groups Prod Administration on Offshore Leasing

WASHINGTON—A coalition of 18 energy trade groups representing all sectors of the U.S. oil and natural gas industry is urging the Biden administration to support U.S. energy security by finalizing a robust program for federal offshore leasing. The groups’ Aug. 1 letter to President Biden calls for the administration to finalize a program that includes the maximum number of lease sales and to begin the pre-leasing work that is required to start holding 2024 sales.

The coalition says its letter follows a recent stipulated stay agreement that has imposed baseless restrictions on an estimated 11 million acres in the U.S. Gulf of Mexico, which leaves the offshore energy industry in an extended period of uncertainty. The letter’s signatories include the Independent Petroleum Association of America, American Petroleum Institute, American Exploration & Production Council and the Louisiana Oil & Gas Association.

“The world needs American energy leadership, but that leadership requires supportive energy policies from Washington,” the letter maintains. “Without the certainty and predictability provided by a robust five-year leasing program, including yearly lease sales to obtain new acres, companies may explore opportunities elsewhere. Their decisions and the resulting economic, energy and environmental benefits will be realized elsewhere, not in the United States.”

In addition to highlighting the critical role offshore production plays in U.S. energy security, local economies along the Gulf Coast and funding conservation programs, the letter also reiterates the importance of offshore production in helping the Biden administration achieve its climate goals. For example, it cites an ICF study on global oil production and emissions that indicates the carbon intensity of U.S. Gulf of Mexico production is 46% lower than production from other parts of the world.

“The success of emerging offshore energy segments, which are prioritized by the Biden administration, is closely intertwined with the long-term success of the domestic offshore oil and gas sector,” the letter states. “Many companies operating in offshore energy, with roots in the oil and gas industry, are actively engaged in finding solutions, expanding, and building new energy segments like offshore wind and carbon capture and storage. However, the lack of a new offshore oil and gas leasing program introduces uncertainty that will inevitably hinder companies’ ability to invest in these promising energy avenues.”

Statutory Foundations

The letter opens by urging the Biden administration to finalize a new National Outer Continental Shelf Oil and Gas Leasing Program that includes the 11 lease sales considered in the proposed program released on July 1, 2022, and to begin pre-leasing work immediately so the U.S. Department of Interior can start holding sales in 2024 without additional delays.

“U.S. offshore oil and natural gas production is fast approaching yet another period of extended uncertainty that could negatively impact American energy security,” the coalition warns. “Though the administration has committed to issuing a new five-year offshore leasing program by the end of September, it already is a year and a half late because the previous program expired in June 2022. Additionally, the proposed program includes an unworkable option to hold zero lease sales.

“Time is running out to avoid significant consequences that could result from a prolonged gap in federal offshore leasing and production in the years ahead,” the letter adds. “The last sale mandated by the Inflation Reduction Act, Lease Sale 261, is scheduled for Sept. 27, so even if the administration’s finalized program includes new sales, the ability to hold a sale in 2024 grows harder every day unless pre-leasing steps are taken now.”

Such action is consistent with federal law, the letter observes, noting that statutes including the Outer Continental Shelf Lands Act and the IRA affirm that the country should make U.S. offshore oil and gas resources available for lease.

“The OCSLA has provided the energy policy backstop needed to foster offshore exploration, leasing, and development for decades, and it clearly endorses a broad, continuous leasing program that is balanced with appropriate environmental safeguards,” the coalition describes. “Meanwhile, the U.S. Energy Information Administration expects that the United States will still depend on oil and natural gas for more than 60% of its energy needs in 2050, and failing to issue a new five-year program in a timely manner undermines the certainty the offshore industry needs to continue to invest billions of dollars in exploration and development of offshore oil and natural gas.”

The United States will meet its need for hydrocarbons either by importing or producing them, the letter notes. “It is best for those resources to come from America and off its shores,” the industry groups suggest. “The administration should embrace policies and actions that encourage continued investments in American offshore leasing, exploration and development. Companies need consistent access to competitive lease sales and the ability to explore for new sources to try and replace depleting reserves. Both are critical to making the long-term investments that offshore development requires, and this is especially true for deepwater projects.”

Minimizing Imports

Thanks to innovation and hard-earned expertise, the U.S. industry has invested in making America a global leader in both emissions reductions and energy production, the coalition reflects. It cites the ICF finding that the carbon intensity of production in the U.S. Gulf is almost half that of production in other parts of the world.

“Delaying or eliminating offshore leasing means that meeting oil and natural gas demand likely will come from regions with less stringent environmental standards and may generate more greenhouse gas emissions as compared with production from the U.S. Gulf of Mexico,” the letter reasons. “This is precisely the opposite of the administration’s stated goals.”

Then there is the contribution U.S. offshore production makes to the Gulf Coast’s regional, state and local economies, the coalition notes, as well as the fact that Gulf output accounts for nearly 15% of U.S. oil and gas production.

Undermining that source of supply carries implications for the balance of world power, the industry groups argue. “Offshore producers’ continued ability to provide oil and natural gas resources supports U.S. foreign policy goals and helps provide much-needed energy security for the U.S. and its allies,” the letter says. “The current geopolitical landscape points to an urgent need for an offshore leasing program and associated policies that encourage opportunities to find and develop essential energy resources.”

Offshore energy development also generates important revenues for federal programs, including the Land and Water Conservation Fund, virtually all of which has been funded by revenues generated through offshore oil and gas activities, the letter notes. Since its 1965 inception, the letter indicates, the LWCF has provided $5.2 billion toward more than 45,000 projects in every county in the country to support increased public access to and protection of federal and state public lands and waters.

In July, the coalition points out, “DOI touted the distribution of nearly $300 million dollars from the LWCF to all 50 states, U.S. territories and the District of Columbia. Interior has also applied recent changes to ensure that tribal nations can access LWCF grants to support future public outdoor recreation and conservation projects. Without a clear path of continued offshore oil and gas leasing, the administration is diminishing the outlook for this cherished program that benefits Americans across our nation.”

Amid warnings that investments in offshore wind and CCS also may suffer from an unpredictable offshore oil and gas leasing program, the letter questions DOI’s procrastination on pre-leasing tasks such as sale-specific environmental assessments, which the department has put off until after finalizing the leasing program.

“Typically, environmental assessments are conducted in parallel with the development of the leasing program to ensure adequate analysis time,” the coalition relates. “This decision may needlessly impede DOI from conducting lease sales in 2024 and potentially beyond.”

Along with IPAA, API, AXPC and LOGA, the letter’s other signatories are the Consumer Energy Alliance, Louisiana Mid Continent Oil & Gas Association, National Ocean Industries Association, U.S. Chamber of Commerce, American Chemistry Council, EnerGeo Alliance, Energy Workforce & Technology Council, Gulf Economic Survival Team, International Association of Drilling Contractors, Louisiana Association of Business and Industry, Manufacture Alabama, Southeast Oil & Gas Association, Texas Oil & Gas Association and U.S. Oil & Gas Association.

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