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Biden order indefinitely postpones March lease sales in Gulf of Mexico, Western states

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Biden order indefinitely postpones March lease sales in Gulf of Mexico, Western states

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Lease sales postponed in Gulf, Colorado, Utah, Wyoming and Montana

Biden administration still approving some drilling permits

Moratorium extends while administration reviews leasing policies

Houston — President Joe Biden's new moratorium on oil and gas lease sales will indefinitely postpone all lease sales previously scheduled under the Trump administration for both onshore acreage and for parcels in the deepwater Gulf of Mexico, the Interior Department confirmed.

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The executive order specifically postpones -- and potentially cancels -- a March lease sale for the deepwater Gulf as well as March sales in Colorado, Utah, Wyoming and Montana. The order also applies to an April lease sale in New Mexico, which is the state potentially most impacted by the moratorium.

The moratorium, which has no time limit, will continue during a new review of fossil fuel leasing and permitting practices on public lands and waters.

"The president's executive order necessitates the postponement of proposed offshore and onshore lease sales on federal lands while the comprehensive review is underway," said Interior Press Secretary Tyler Cherry on Jan. 28.

Oil and gas producers loaded up on drilling permit applications much of last year in anticipation of a potential Biden administration, especially in New Mexico. But interest in recent deepwater Gulf leasing sales has remained weak in recent years.

The moratorium followed an Interior decision to -- for 60 days -- only allow drilling permits approved by senior Biden administration officials, and not Bureau of Land Management field offices. However, some new permitting has continued since Biden took office on Jan. 20.

The moratorium also does not apply to existing leases and permits, and Biden emphasized Jan. 27 there is no "fracking ban."

Lots of inventory

According to the Department of Interior, the oil and gas industry "has stockpiled millions of acres of leases," and is "sitting on approximately 7,700 unused, approved permits to drill."

"Onshore, of the more than 26 million acres under lease to the oil and gas industry, nearly 13.9 million (or 53%) of those acres are unused and non-producing," Interior said in a Jan. 27 release. "Offshore, of the more than 12 million acres of public waters under lease, over 9.3 million (or 77%) of those acres are unused and non-producing."

Auctions held under the Trump administration generated little interest from the industry, according to Interior, with only 5 million offshore acres purchased from 78 million acres offered over the past four years.

About 22% of US oil production and 12% of natural gas production takes place on federal lands and waters, but the planned moratorium would not undo existing leases and permits.

In its Jan. 28 earnings call, officials from Murphy Oil, which has extensive operations in the Gulf of Mexico and some in the onshore US, said the company remains well positioned despite Biden's actions. CEO Roger Jenkins also noted that some Gulf approvals have continued since Biden took office.

"We expect, once the dust settles, that permitting approvals will return to a process we can work with," Jenkins said. "It's not in the government's best interest to halt operations in the Gulf for a host of financial and legal reasons. Again, we have a diverse portfolio, and all these actions are highly likely to increase oil prices, which would be in our favor over time."

More than 60% of the current inventory of the nation's federal drilling permits are in New Mexico's Delaware Basin. Nationwide, nearly 4,000 permits for new wells are undrilled or uncompleted.

Apart from New Mexico, the American Petroleum Institute said federal lands accounted for more than 40% of the shale gas production in Colorado, more than 60% in Utah and more than 90% in Wyoming.

Critics contend Biden's executive order, which has no set time limit, will hurt US energy security and oil production, prop up foreign adversaries, cost thousands of American jobs during a weak economy amid the pandemic, and create winners and losers within the US by harming oil-producing states with more federal lands and waters.

However, environmental groups are praising Biden's rapid moves on climate and energy issues.

In response to order, the Western Energy Alliance filed a lawsuit on Jan. 27, claiming Biden exceeded his presidential authority.

New Mexico industry officials have complained that the moratorium will lead to producers shifting away from the New Mexican Permian Basin back to the Texas side of the Permian, which is all unaffected private land.

Louisiana officials contend the Gulf leasing moratorium could decimate much of the state's oil and gas services sector and hurt state revenues from offshore revenue-sharing agreements with the federal government.