Another month and another example of the Biden administration angering nearly everyone by trying to ‘split the baby’ with its energy policy. There’s an old maxim about how if everyone’s mad at you, you must be doing something right. By its measure, this administration’s approach to oil and gas must be close to perfect.
On Sept. 29, 2023, the Department of the Interior released its 5-year plan for offshore oil and gas leasing without including a single sale in 2024, and only three between now and 2029. Sales will be held every other year starting in 2025.
The three proposed were the smallest number allowed under the requirements of the 2022 Inflation Reduction Act (IRA) while still being able to hold auctions for offshore wind leases. The IRA does not allow the Bureau of Ocean Energy Management (BOEM) to issue a lease for offshore wind development unless the agency has offered at least 60 million acres for oil and gas leasing on the Outer Continental Shelf (OCS) in the previous year.
“The Biden-Harris administration is committed to building a clean energy future that ensures America’s energy independence,” Interior Secretary Deb Haaland said, also acknowledging that the proposed number of leases “represents the smallest number…in history” and “sets a course for the [Interior] Department to support the growing offshore wind industry.” The smallest number of sales offered by BOEM in previous 5-year plans was 11, with most plans proposing 15-20.
Industry reacted accordingly. National Ocean Industries Association president Erik Milito described the plan as “an utter failure for the country,” going on to say that “the White House simply ignores our energy realities…limiting US energy production opportunities.”
“This restrictive offshore leasing program is the latest tactic in a coordinated strategy to reduce energy production, ultimately weakening America’s energy dominance, limiting consumers access to affordable reliable energy, and compromising our ability to lead on the global stage,” said American Petroleum Institute chief executive officer and president Mike Sommers. “For decades, we’ve strived for energy security and this administration keeps trying to give it away,” he added.
The numbers
But this furor is at least somewhat overblown. The amount of acreage to be offered isn’t shockingly low. And, at least according to recent history, most of it will likely not be bid on anyway.
The most recent Gulf of Mexico oil and gas lease sale, held earlier this year, resulted in 1.6 million acres being awarded of roughly 73 million on offer. A November 2020 sale had roughly 518,000 acres bid on of nearly 80 million offered.
In November 2021, more acres (80.9 million) were put on offer than ever, with 1.7 million bid on. Acreage was divided into three separate sales in 2016, one each for the Western, Central, and Eastern GoM. Total acreage bid on among the three was 832,202 out of roughly 67 million offered. Bids for the three sales held in 2014 were somewhat more robust—totaling 2.1 million acres—and even more so going back to 2008, when 5.3 million acres were bid on out of 48.6 million offered.
Placed in this context, it’s hard to see how putting a minimum of 180 million acres on the block between 2025 and 2029 is going to somehow strangle the industry. This in turn casts a clearer focus on the resulting outrage. Segments of the Left are upset because the lease sales fly in the face of Biden’s 2020 campaign rhetoric. Segments of the Right are upset because failure to be would leave low-hanging political ammo on the vine.
The calculus that fewer acres put on lease will in and of itself lead to less oil and gas production and higher prices is a straightforward sell to the average low-information voter. But that doesn’t mean it adds up.
