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Biden pulls 3 offshore oil lease sales, curbing new drilling this year

With the nationwide offshore drilling program expiring at the end of June, oil companies and climate activists face uncertainty over the future of leasing

Docked oil drilling platforms seen in May 2020 in Port Aransas, Tex. (Eric Gay/AP)

The Interior Department confirmed Wednesday that it will not hold three oil and gas lease sales in the Gulf of Mexico and off the coast of Alaska that had been scheduled to take place, taking millions of acres off the auction block.

The decision, which comes as U.S. gas prices have reached record highs, effectively ends the possibility of the federal government holding a lease sale in coastal waters this year. The Biden administration is poised to let the nationwide offshore drilling program expire next month without a new plan in place.

While President Biden has spoken in recent weeks about the need to supply oil and gas to Europe so those nations can stop importing energy from Russia in light of the ongoing war in Ukraine, the move would mark a victory for climate activists intent on curbing U.S. fossil fuel leasing.

Barring unexpected action, the current five-year offshore drilling program will lapse at the end of June. Interior cannot hold any new oil and gas lease sales until it has completed a replacement plan. But though the federal government is legally obligated to prepare one, the administration has not released its proposal, nor have officials said when it might be coming.

The program’s looming expiration means the government doesn’t have enough time left to hold the three remaining oil and gas lease sales scheduled under the current plan. Interior spokeswoman Melissa Schwartz cited a lack of interest from oil companies, as well as legal obstacles and a time crunch, as reasons for nixing the planned auctions.

In an email Wednesday evening, Schwartz said the department “will not move forward” with a roughly 1 million-acre sale in Alaska’s Cook Inlet “due to lack of industry interest in leasing in the area.”

She added that the department will not hold “lease sales 259 and 261 in the Gulf of Mexico region as a result of delays due to factors including conflicting court rulings that impacted work on these proposed lease sales.”

Environmentalists praised the move, but the oil and gas industry and Republicans voiced dismay. Offshore drillers have sought to raise the alarm for months about the leasing program’s June 30 expiration date, saying that a lapse in the program would cost thousands of jobs and billions in lost tax revenue.

Erik Milito, president of the National Ocean Industries Association, which represents offshore energy companies, said in an interview Thursday that the expiration of the offshore leasing program will chill investment in the Gulf of Mexico.

“Over the past few years, there have been several announcements of new projects coming online, so it’s very positive," he said. “However, we’re not going to be able to continue with that trend if we can’t get new leases.”

Biden officials have said they are working on a proposal for a new offshore program and describe the industry’s concerns as overblown. According to Interior’s figures, more than three-quarters of the offshore federal waters already under lease remain unused — that’s about 8 million acres where companies could drill new wells but have not.

Because most oil-and-gas production takes place on private and state-owned land, experts have said there’s little evidence the administration’s leasing approach will affect prices in the months ahead. Even if Interior held the three planned offshore lease sales, it typically takes years for companies to drill new wells and ramp up production.

Still, Republican lawmakers have seized on the issue as a way to direct Americans’ frustration over rising prices at the White House.

Rep. Bruce Westerman (Ark.), the top Republican on the House Natural Resources Committee, called the administration’s decision a sign of its “blatant disregard” for Americans struggling with inflation.

“I can’t imagine a more tone-deaf, shortsighted decision that jeopardizes our economic and energy security without doing a single thing to help the environment or the American people," he said in a statement.

Replacing the current plan won’t happen overnight. The timeline spelled out in regulations governing the program requires a three-step process involving environmental analysis, public comment periods and a review by the president and Congress.

It typically takes the government at least six months to a year to finalize a new offshore drilling plan. This means that even if the Interior Department unveils a new proposal in the coming weeks, the soonest energy companies will learn whether they will have access to new leases, and where, is probably early 2023.

Amid rising oil prices, inflationary pressure and the upcoming midterm elections, there is much uncertainty over how far the administration is willing to go on offshore drilling.

As a candidate, Biden promised to making tackling climate change a priority. He temporarily halted new oil and gas leasing on federal land and waters a week after taking office. But after a Louisiana judge struck down the moratorium last summer, administration officials said they were legally obligated to continue leasing.

Since then, the political pressure to expand drilling on federal land and waters has increased. Oil and gas industry lobbyists and Republican lawmakers have tried to blame high gas prices on the president’s climate policies. For his part, Biden has shifted from talk of banning new drilling to proposing a new policy that would push oil companies to drill on unused leases.

In the midst of internal wrangling and a broader political divide over the future of oil and gas leasing, the administration has delayed making a decision about whether to continue selling new offshore leases and, if so, how much of the nation’s coastal waters should be up for auction.

Conservationists have argued that the environmental risks posed by offshore drilling outweigh the benefits of future leases. Offshore oil and gas production accounts for a relatively small percentage of the nation’s overall supply, they argue, and the 2010 BP oil spill in the Gulf crippled the seafood industry, hurt tourism and depleted tax revenue in southeastern states.

“Big Oil is using anything they can find to try to extend the life of a dying fossil fuel industry. They are lying when they say they need more leases,” said Diane Hoskins, a campaign director with the environmental group Oceana. “We cannot drill our way out of high gas prices, and it would take years or decades for any new leases to begin producing.”

Of the 11 lease sales planned under the current program, seven have been held successfully. Interior held one more in November, auctioning off 80 million acres in the Gulf of Mexico in the largest offshore oil and gas lease sale in the nation’s history. Only a fraction of those leases sold, and a federal judge later threw them out, citing a flawed environmental analysis completed during the Trump administration.

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