Washington — The US Interior Department has approved more than 500 drilling permits on federal lands and waters since January, and operators hold nearly 8,000 permits that are ready to use, despite the Biden administration's indefinite ban on leasing sales, an official told Congress on April 27.
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Drillers have submitted another 5,600 permit applications for consideration, Nada Culver, Bureau of Land Management deputy director of policy and programs, told the Senate Energy and Natural Resources Committee during a hearing on Interior's leasing review.
"To be clear, as we're conducting the review, industry continues to produce from existing operations while submitting new drilling permits," Culver said, later making the case for a review of the program's fiscal and climate impacts.
"We simply cannot continue doing business as we have in the past," she said. "It's incumbent on us to look forward, adapting to the changing landscapes, climate, environment and technologies."
Senator John Barrasso of Wyoming, the committee's top-ranking Republican, said the Biden administration is intent on ending oil and gas leasing on federal lands despite the program having some of the most "stringent regulations in the world." He said the review will devastate the economies of Wyoming, New Mexico and other states.
"Make no mistake, this is not a pause or a review, this is a ban," Barrasso said. "And currently there is no end in sight."
Muted near-term impact
The Biden administration has halted lease sales for federal acreage both onshore and offshore at least through June while it reviews the program.
S&P Global Platts Analytics estimates a permanent ban on federal leasing would lower US onshore production by 1 million-1.2 million b/d in the next five years or by as much as 1.6 million b/d if operators with existing leases are not able to get new permits, which it considers unlikely. Risks to offshore production would not show up for at least 10 years.
Platts Analytics expects US oil production to decline by 500,000 b/d year on year in 2021 before increasing by 1 million b/d in 2022.
Use it or lose it
Wyoming Governor Mark Gordon testified to the Senate committee that restarting federal lease sales is vital to his state as oil and gas drillers recover from the 2020 demand plunge and Saudi-Russian oil price war. Wyoming currently has seven drilling rigs, compared with none in August 2020 and 34 in February 2019, and jobs in the oil and gas sector fell from 13,100 in October 2019 to 7,200 as of October 2020, Gordon said.
Responding to suggestions that operators are stockpiling federal acreage, Occidental Petroleum CEO Vicki Hollub told the committee: "This simply is not true."
Hollub said the Mineral Leasing Act already requires drillers to return leases to the federal government if they do not produce oil and natural gas on them within a certain timeline. She said the law also prevents any company from locking up unproductive excessive federal acreage and limits the amount of unproductive acreage a leaseholder can have in any single state.
Hollub said delays would start to impact US production, as onshore drilling permits can take up to a year to be approved.
"This long lead time means that as we evaluate our completions and geology, well design changes often result in the need to re-permit the same areas," she said. "Lack of clarity or permitting guidance can extend these times, often increasing the cost and the surface disturbance."
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