WASHINGTON – Today, American Exploration and Production Council (AXPC) CEO Anne Bradbury released the following statement about the release of the US Department of Interior interim report for the review of the federal oil and gas program called for in the Biden Administration’s Executive Order 14008:
“This Thanksgiving, we are grateful to live in a country with abundant natural resources that support our nation’s energy security and climate leadership. It is through domestic production of affordable and reliable oil and natural gas – including on federal lands and waters – that underpins our nation’s ability to remain energy secure and keep prices low for American families and businesses.
“We share the Administration’s goal of finding ways to reduce energy costs at a time of historic inflation – which is why we encourage the Administration to avoid policies that make it harder to produce energy here in America.
“First and foremost, the Administration should support the production of oil and natural gas from federal lands and waters, as it accounts for about 20 percent of domestic production – playing a significant role in energy security and affordable energy prices.
“We also hope the Administration will work with our industry to develop sensible and smart solutions for the policy areas discussed in DOI’s report, to ensure responsible development of federal lands continues for the benefit of the American taxpayer. Federal oil and natural gas exploration and production activities contribute billions of dollars to federal and state governments, support millions of good paying jobs and local economies, and are conducted under some of the most stringent safety and environmental regulations in the world.
“Arbitrary leasing or permitting restrictions only serve to cause uncertainty for American businesses and strained budgets for state and federal governments as well as local communities. We appreciate where this report recognizes the positive contribution that our industry makes to the country and look forward to working with the Administration to build on our environmental and economic progress together.”
While we have not had time to fully review the DOI interim report on the oil and gas leasing program, there are many issues within the Interior Department’s jurisdiction that are important to independent upstream producers that operate on federal lands including:
- Fair Returns: In 2019 alone, oil and gas contributed more than $8.5 billion to the federal government through bonuses, rents, and royalties. When setting rates for leases, it is important for DOI to consider all the factors, including bonuses paid on federal leases and the risk that goes with developing federal minerals, to ensures opportunities generate competitive interest. Ensuring a fair return to the taxpayer for their minerals means DOI must take care not to price these opportunities out of the market.
- Emissions: According to a 2018 USGS study, the extraction of oil and natural gas from federal lands accounts for just 0.6 percent of total U.S. greenhouse gas emissions, an intensity that is proportionally much less than the sizable production and economic value these activities provide.
- A recent study found that stopping leasing and development on federal lands and waters would result in an increase in coal use by 15 percent and a 5 percent rise in carbon dioxide emissions from the power sector by 2030.[i]
- Lease Terms: Development on federal lands is a lengthy and complicated process that includes everything from public comment to site visits to archeological and wildlife surveys. In past years, DOI has explained that its lease terms were designed with “diligence in mind” after considering the timelines necessary to comply with federal regulations for development. Shorter lease terms would likely have the effect of dissuading investment, if timelines are unrealistic against the realities of these challenges that exist for federal lands development.
- Noncompetitive Leases:[1] The Bureau of Land Management offers leases competitively through auction and noncompetitively for a fee only after an adequate bid is not received at auction. Noncompetitive leases must first go through the competitive process before they become noncompetitive. According to GAO, for leases that started in FY2003—FY09, it has been found that competitive leases produced oil and gas more often than noncompetitive leases during the leases’ 10-year primary term.
- Financial Assurance and Well Decommissioning: Federal and state regulations require each company to provide financial assurance to cover the cost of decommissioning wells in as the event a company files for bankruptcy. Bonding levels are typically tiered layers at local, state, and nationwide, together considering the relative risk of a decommissioning liability falling to the regulator.
- Domestic oil and gas production in the United States is highly-regulated both at the State and Federal levels, and domestic production is necessary right now to deliver affordable domestic energy. In addition to complying with hundreds of federal and state regulatory requirements, United States operators follow best practices and employ new technologies to reduce our surface footprint and ensure that public lands are not unnecessarily used or unduly impacted.
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[1] https://www.gao.gov/assets/gao-21-138-highlights.pdf
[i] https://www.api.org/news-policy-and-issues/exploration-and-production/federal-leasing-and-development-ban-study