Following a hearing last week that showcased the economic necessity of the Department of Interior’s five-year offshore leasing plan, yesterday the Independent Petroleum Association of America, the American Petroleum Institute, and fifteen other energy trade associations sent a letter urging President Biden to support U.S. energy security by finalizing a new five-year program. Since the last leasing plan concluded, the Biden administration has delayed the release and implementation of the legally-mandated offshore leasing program.
The letter from the broad coalition – which includes the American Chemistry Council, the US Chamber of Commerce, EnerGeo Alliance, and several state and regional trade groups – highlighted the critical role that the offshore oil and natural gas industry plays in securing American energy security:
“The world needs American energy leadership, but that leadership requires supportive energy policies from Washington.
“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 U.S.” (emphasis added)
While it should go without saying, the coalition is urging the Biden administration to finalize a five-year leasing program that will actually result in lease sales occurring. One year ago, the Department of Interior solicited public comment on a draft offshore leasing program, which included options ranging from no lease sales up to eleven lease sales. At the time the draft was released, Frank Macchiarola, former Senior Vice President at API and current Chief Policy Officer at the American Clean Power Association, called the no-lease option “the exact wrong policy at the wrong time.”
The coalition letter argues that the administration should move forward with a proposed program that schedules the maximum lease sales possible, starting in 2024. As it stands now, even with the completion of lease sales mandated by the Inflation Reduction Act, time is running out to hold any offshore lease sales in 2024 due to the litany of pre-lease steps companies must take to ensure safe and environmentally sound operations.
Completion of the five-year offshore program isn’t just a statutory obligation, it’s also an environmentally and economically smart decision. Globally, interest in offshore oil and natural gas is surging for the first time in decades, with over $200 billion expected to be allocated to deepwater projects in 2022 to 2025. Companies want to capitalize on the momentum, but the Biden administration risks driving them away from the Gulf of Mexico and towards foreign basins that produce at much higher emissions intensity rates.
Beyond the relative emissions benefits of domestic offshore oil and natural gas production, limiting companies’ ability to expand their infrastructure footprint in the Gulf will hinder development of other renewable and low-carbon technologies that are deployed offshore.
Domestic offshore oil and natural gas producers are familiar with the operations, workforce requirements, and capital needs required to safely produce energy on the outer continental shelf with minimal impact to the natural environment. Consequently, many of the major players in domestic offshore oil and natural gas development are diversifying their operations in the Gulf. But as the letter points out, an unfriendly policy environment for any offshore leasing hinders both traditional and renewable energy development:
“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 (CCS). 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.”
Instead of standing in the way of meeting consumer needs, the Biden administration should look to the critical role the offshore energy industry can play in achieving climate and energy security goals.
Bottom Line: Offshore energy production is integral to American energy security and the Gulf Coast economy. The Biden administration needs to finalize the offshore leasing program to secure domestic energy production for years to come.
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