Biden administration pauses federal drilling program in climate push
By Nichola Groom and Jennifer Hiller
© Reuters/Nick Oxford FILE PHOTO: Pump jacks operate at sunset in Midland
(Reuters) - U.S. President Joe Biden's administration has temporarily suspended oil and gas permitting on federal lands and waters in the latest of a series of rapid-fire orders aimed at fighting climate change and tamping down the U.S. fossil fuel industry.
The order appeared to be a first step in delivering on newly sworn-in Biden's campaign pledge to permanently ban new drilling on federal acreage. Federal leases account for close to 25% of the nation's crude oil output, making them a big contributor to energy supply but also to America's greenhouse gas emissions.
Biden's predecessor Donald Trump had sought to maximize production of oil, gas and coal on federal acreage, and routinely downplayed threats from global warming.
The suspension was welcomed by environmentalists but derided by the oil and gas industry, which is struggling to secure a future under a new administration that has vowed to make countering global warming a top priority.
The 60-day pause strips Interior Department agencies and bureaus from their authority to issue drilling leases or permits while the administration reviews the legal and policy implications of the federal minerals leasing program, according to a Department of Interior memo. The order does not limit existing operations, it said.
Shares of U.S. shale producers with federal lands exposure fell following the news on Thursday.
EOG Resources Inc and Cimarex Energy Co closed down 8.6%, Devon Energy Corp fell 7.9% and Occidental Petroleum Corp closed down 6.4% on the New York Stock Exchange.
"This is a frack ban," Anne Bradbury, chief executive of the drilling trade group American Exploration & Production Council, said in an interview. "Even just for 60 days, it's a really aggressive move."
Many of the largest onshore drilling companies had stockpiled permits https://www.reuters.com/article/idUSKBN29Q1S5 in anticipation of a change in federal policy ahead of Biden's election, insulating them from a ban.
The order came close on the heels of a raft of other executive actions aimed at fighting climate change, including re-engaging the United States in the Paris climate accord and canceling a permit for the Keystone XL oil pipeline from Canada.
JOBS VERSUS CLIMATE
Jesse Prentice-Dunn, policy director of the environmental advocacy group Center for Western Priorities, said "the Biden administration is rightfully attempting to take stock of the damage and make sure the agency is following the law."
But big industry groups American Petroleum Institute and Western Energy Alliance swiftly issued statements condemning the pause and framing it as a threat to the economy.
"With this move, the administration is leading us toward more reliance on foreign energy," API President Mike Sommers said.
Limits on federal drilling will have the biggest impact on major Western producing states like New Mexico and Wyoming, which depend on revenue from their share of extraction royalties.
In a statement, the New Mexico Oil & Gas Association said that restricting development "risks the loss of more than 60,000 jobs and $800 million in support for our public schools, first responders, and healthcare services."
White House officials did not immediately return a request for comment.
(Reporting by Nichola Groom, Editing by Richard Valdmanis, Aurora Ellis and Marguerita Choy)
Big U.S. oil drillers have federal permits to mute effect of any Biden ban
By Jennifer Hiller and Nichola Groom
© Reuters/NICK OXFORD FILE PHOTO:
A drilling rig operates in the Permian Basin oil and natural gas producing area in Lea County
(Reuters) - U.S. President Joe Biden's promised ban on new oil and gas drilling on federal lands would take years to shut off production from top shale drillers because they already have stockpiled permits, according to Reuters interviews with executives.
But smaller independent oil drillers without the resources of big corporations were more worried about Biden's vow to toughen regulations and stop issuing new permits on federal lands, part of his sweeping plan to combat climate change and bring the economy to net zero emissions by 2050.
Federal lands are the source of about 10% of U.S. oil and gas supply. Fossil fuels produced on federally managed lands and waters contribute nearly 25% of U.S. greenhouse gas emissions, according to government estimates, making them an easy target for the administration's climate agenda.
Biden's pledge would reverse former President Donald Trump's efforts to maximize drilling and mining on federal property. In an order dated Wednesday, the Biden administration suspended oil and gas leasing and permitting on federal lands for 60 days while it reviews the legal and policy implications of the mineral leasing program. But a freeze or ban will not end production in those areas overnight.
The seven companies that control half the federal supply onshore in the Lower 48 states have leases and permits in hand that could last years.
"We have always been very confident that we will continue to develop and drill on federal acreage," said David Hager, executive chairman of Devon Energy Corp, the biggest oil producer on onshore federal land in the Lower 48 states. "It's embedded into the rights we have in the leases and we're doing it the right way."
He said he expected the company's federal lands permits would last at least four years.
Other top producers on federal land include EOG Resources Inc, ExxonMobil Corp, Occidental Petroleum Corp, ConocoPhillips, and Mewbourne Oil Company.
Representatives at these companies did not comment for this article. But several have issued public statements saying they have solid stockpiles of federal permits and an ability to meet tougher emissions regulations expected under Biden. They have also said they can quickly shift drilling to state or private acreage once federal permits dry up.
EOG has said it has at least four years of federal permits. "When it comes to access to federal lands, that's one of the things we're not really worried about in our business. We have a lot of potential outside of federal land, too," Chief Operating Officer Billy Helms said during an investor conference last year.
Occidental said last year it had well over 200 federal drilling permits in hand and had requested another roughly 200 permits on New Mexico acreage, where some of the richest reserves lie beneath federally owned property.
Ameredev II, which produces about 10,000 barrels of oil per day in New Mexico's Permian, also has federal drilling permits to last at least four years.
"We're trying to maximize our value against an uncertain range of possibilities," said CEO Parker Reese.
Energy consultancy Rystad said it saw stockpiling of federal lands drilling permits in the run-up to the November presidential election, with federal permit requests rising to a 31% share of all permit requests in the major U.S. oilfields from 18% in 2019.
Biden's team did not respond to several requests for comment.
Most onshore federal drilling happens in Western states like New Mexico, Colorado and Wyoming, which get a share of extraction royalties and depend on that revenue.
As Biden takes office, U.S. shale drilling industry has already declined sharply due to weak prices.
Total U.S. shale output is expected to fall to 7.5 million barrels per day in February, the U.S. Energy Department said on Tuesday, which would be the lowest since June 2020.
Shale drilling accounts for roughly two-thirds of U.S. crude oil production, but output is expected to decline throughout 2021 as producers rein in spending.
'EXISTENTIAL THREAT'
A large swathe of the industry is made up of smaller firms that lack the deep pockets to squirrel away permits, get a jumpstart on installing new emissions control technologies or take their business elsewhere.
"The impact on the independent oilman is a heck of a lot greater than it is on Big Oil," said Don Law, owner of Denver-based Prima Exploration Inc, which produces about half of its 1,000 barrels of oil a day on federal lands, mainly in Wyoming, New Mexico and North Dakota.
Law called Biden's promised policy "an existential threat" unlike any he has encountered in 40 years in the oil business, echoing the rhetoric used by some climate activists about the threat posed by global warming.
Many smaller drilling firms operate in a single state or basin, according to trade group Western Energy Alliance, and would struggle to pack up and leave.
"I actually live here," said Mark Murphy, a third-generation oilman in New Mexico. His company, Strata Production Co, has 15 employees and operates 47 wells, mostly on federal acreage.
Western Energy Alliance, the oil and gas industry trade group most focused on public lands policy, has pledged to fight any efforts to impose a leasing ban in court. States that rely heavily on revenues from federal oil and gas drilling are also ramping up opposition.
Last month Wyoming officials issued a study that said a ban would cost eight Western states $8.1 billion in tax revenue and $34.1 billion in investment in the next five years. The state's governor, Mark Gordon, called the predictions "devastating."
New Mexico's Democratic Governor Michelle Lujan Grisham said in late 2019 that she would seek a waiver from any drilling ban imposed by a future administration. But she has not discussed the issue publicly since, and her office did not respond to several requests for comment.
(Reporting by Jennifer Hiller and Nichola Groom; editing by Richard Valdmanis and David Gregorio)
(Reuters) - U.S. President Joe Biden's promised ban on new oil and gas drilling on federal lands would take years to shut off production from top shale drillers because they already have stockpiled permits, according to Reuters interviews with executives.
But smaller independent oil drillers without the resources of big corporations were more worried about Biden's vow to toughen regulations and stop issuing new permits on federal lands, part of his sweeping plan to combat climate change and bring the economy to net zero emissions by 2050.
Federal lands are the source of about 10% of U.S. oil and gas supply. Fossil fuels produced on federally managed lands and waters contribute nearly 25% of U.S. greenhouse gas emissions, according to government estimates, making them an easy target for the administration's climate agenda.
Biden's pledge would reverse former President Donald Trump's efforts to maximize drilling and mining on federal property. In an order dated Wednesday, the Biden administration suspended oil and gas leasing and permitting on federal lands for 60 days while it reviews the legal and policy implications of the mineral leasing program. But a freeze or ban will not end production in those areas overnight.
The seven companies that control half the federal supply onshore in the Lower 48 states have leases and permits in hand that could last years.
"We have always been very confident that we will continue to develop and drill on federal acreage," said David Hager, executive chairman of Devon Energy Corp, the biggest oil producer on onshore federal land in the Lower 48 states. "It's embedded into the rights we have in the leases and we're doing it the right way."
He said he expected the company's federal lands permits would last at least four years.
Other top producers on federal land include EOG Resources Inc, ExxonMobil Corp, Occidental Petroleum Corp, ConocoPhillips, and Mewbourne Oil Company.
Representatives at these companies did not comment for this article. But several have issued public statements saying they have solid stockpiles of federal permits and an ability to meet tougher emissions regulations expected under Biden. They have also said they can quickly shift drilling to state or private acreage once federal permits dry up.
EOG has said it has at least four years of federal permits. "When it comes to access to federal lands, that's one of the things we're not really worried about in our business. We have a lot of potential outside of federal land, too," Chief Operating Officer Billy Helms said during an investor conference last year.
Occidental said last year it had well over 200 federal drilling permits in hand and had requested another roughly 200 permits on New Mexico acreage, where some of the richest reserves lie beneath federally owned property.
Ameredev II, which produces about 10,000 barrels of oil per day in New Mexico's Permian, also has federal drilling permits to last at least four years.
"We're trying to maximize our value against an uncertain range of possibilities," said CEO Parker Reese.
Energy consultancy Rystad said it saw stockpiling of federal lands drilling permits in the run-up to the November presidential election, with federal permit requests rising to a 31% share of all permit requests in the major U.S. oilfields from 18% in 2019.
Biden's team did not respond to several requests for comment.
Most onshore federal drilling happens in Western states like New Mexico, Colorado and Wyoming, which get a share of extraction royalties and depend on that revenue.
As Biden takes office, U.S. shale drilling industry has already declined sharply due to weak prices.
Total U.S. shale output is expected to fall to 7.5 million barrels per day in February, the U.S. Energy Department said on Tuesday, which would be the lowest since June 2020.
Shale drilling accounts for roughly two-thirds of U.S. crude oil production, but output is expected to decline throughout 2021 as producers rein in spending.
'EXISTENTIAL THREAT'
A large swathe of the industry is made up of smaller firms that lack the deep pockets to squirrel away permits, get a jumpstart on installing new emissions control technologies or take their business elsewhere.
"The impact on the independent oilman is a heck of a lot greater than it is on Big Oil," said Don Law, owner of Denver-based Prima Exploration Inc, which produces about half of its 1,000 barrels of oil a day on federal lands, mainly in Wyoming, New Mexico and North Dakota.
Law called Biden's promised policy "an existential threat" unlike any he has encountered in 40 years in the oil business, echoing the rhetoric used by some climate activists about the threat posed by global warming.
Many smaller drilling firms operate in a single state or basin, according to trade group Western Energy Alliance, and would struggle to pack up and leave.
"I actually live here," said Mark Murphy, a third-generation oilman in New Mexico. His company, Strata Production Co, has 15 employees and operates 47 wells, mostly on federal acreage.
Western Energy Alliance, the oil and gas industry trade group most focused on public lands policy, has pledged to fight any efforts to impose a leasing ban in court. States that rely heavily on revenues from federal oil and gas drilling are also ramping up opposition.
Last month Wyoming officials issued a study that said a ban would cost eight Western states $8.1 billion in tax revenue and $34.1 billion in investment in the next five years. The state's governor, Mark Gordon, called the predictions "devastating."
New Mexico's Democratic Governor Michelle Lujan Grisham said in late 2019 that she would seek a waiver from any drilling ban imposed by a future administration. But she has not discussed the issue publicly since, and her office did not respond to several requests for comment.
(Reporting by Jennifer Hiller and Nichola Groom; editing by Richard Valdmanis and David Gregorio)
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