Following a popular commitment made on the campaign trail, President Joe Biden instituted a pause on new oil and gas leasing on national public lands while the U.S. Department of the Interior conducts a review of the program. Importantly, the targeted pause does not affect oil and gas under state, tribal, or private subsurface ownership. It is a commonsense move that will allow the administration to become a better steward of the public lands owned by all Americans, from ensuring that the public is involved in land management decisions to providing a fair return to taxpayers for the use of their resources.
The response from the oil industry, however, has been nothing short of dramatic, claiming that the pause will drastically affect production and jobs. A new Center for American Progress analysis finds that these statements are outright false. In reality, companies could continue to begin new drilling operations on unused leases at the current rate for at least the next 10 years without access to any new leases. Despite the industry’s “sky is falling” claims, federal oil and gas development is unlikely to change substantially with a pause on new leasing because the industry already has access to so many acres of public lands.
Oil and gas companies do not need new leases on public lands
While the industry’s fearmongering would seem to suggest that they are running out of leased lands on which to produce, more than half of all acres currently leased—13.9 million acres in total—are not yet being used to produce oil or gas. Over the past four years, the Trump administration orchestrated a fire sale of public lands, and companies stockpiled leases on millions of those acres. By sitting idle on these leases, the industry is not creating any revenue or jobs—energy or otherwise. It is, however, making a sizable parcel of public lands unavailable for other valuable uses, such as recreation and conservation, at the taxpayer’s loss.
The leasing pause only halts the sale of new leases on public lands. It does not affect current production, which can continue on all lands that are currently leased and producing. Furthermore, it does not prohibit companies from applying for new permits to drill or from starting production on the millions of acres of idle public lands for which they already have leases.
Using the oil and gas industry’s own track record, CAP estimated how long it would take for companies to start production on all of these idle acres, if they so desired. Over the past five years, the industry has started production on an average of 106,980 acres each fiscal year. At this rate, the current stockpile of idle acres can see the industry through fiscal year 2030 without requiring a single new lease. In other words, oil and gas companies already have access to enough unused leases to last until 2030, when General Motors, Ford, Volvo, and other major automakers will be well on their way to selling only electric vehicles—and the market will have realistically turned further away from oil.
Under current leasing laws, a standard lease on public lands expires after 10 years if it doesn’t go into production. CAP’s analysis shows that, at current rates, the industry is actually slated to let 12,941,936 acres of leased lands expire, contradicting claims that companies are desperate for new leases. Any reduced production would be a result of the industry’s own behavior. A caveat to the expiring leases is the fact that there are many ways for companies to lengthen the terms of their nonproducing leases to avoid expiration and hold onto public lands. Therefore, it’s likely that the industry will have even more than 10 years to begin producing on the lands it has already leased.
Furthermore, CAP’s analysis may actually undercount how many years the industry can survive—and thrive—in the absence of new leases, as it does not take into account the nearly 13 million acres of leased lands that are already producing oil and gas. Once leased land is under production, it is no longer subject to a 10-year cap on the lease and does not expire until the wells go dry or companies abandon them. In fact, according to the Congressional Budget Office, older leases are responsible for most production and revenues on public land.
The industry’s disingenuous claims about the effect of the leasing pause do not hold up when looking at the number of years it would take oil and gas companies to start new operations on existing idle lands; and their argument really falls apart when considering how many more years both new and decades-old operations could realistically run.
Conclusion
Reforming the federal leasing system to work for taxpayers, local economies, and other stakeholders is a threat to the sweetheart deal that the oil and gas industry has been getting on U.S. public lands for far too long. As CAP’s analysis finds, the leasing pause alone does not have the power to hasten the industry’s decline, but it does have the power to examine a broken system that is long overdue for reform. The Biden administration’s review of the federal leasing program can identify ways to make the country’s public lands work for everyone without significantly affecting the oil industry. It is essential that the Biden administration begin to improve stewardship of public lands and waters as part of an effort to build a system that supports a just and equitable energy future.
Sahir Doshi is research assistant for Public Lands at the Center for American Progress. Jenny Rowland-Shea is a senior policy analyst for Public Lands at the Center. Nicole Gentile is the senior director for Public Lands at the Center.
The authors would like to thank Steve Bonitatibus of the Center for American Progress as well as Alison Gallensky of Rocky Mountain Wild for their contributions to this column.
Methodology
In order to estimate the number of years that the oil and gas industry can continue to convert idle acreage into producing acres, CAP used U.S. Bureau of Land Management (BLM) data to calculate how many acres a year would begin production and how many would expire. This involved three steps:
- The authors determined the current “idle acreage,” which refers to the sum of all leased acres that were not being used for production at the end of FY 2020, using data from the BLM statistics webpage. The total idle acreage at the end of FY 2020 was 13,893,058 acres.
- The authors determined the industry’s conversion rate, which refers to the estimate of how many idle acres the industry converts into producing acres, on average, in a single fiscal year. The analysis used LR2000 “memo of first production” data from FY 2016 to FY 2020 to determine the conversion rates in each of those five years. From these, an average rate was derived for the forecast. To add Alaska to this figure, the authors estimated the annual conversion in Alaska by determining the average conversion rate of all other states as defined by LR2000. This estimated Alaska figure (8,915 acres) was then added to the Lower 48 figure (98,065 acres) to derive an average national conversion rate of 106,980 acres per fiscal year.
- The authors forecasted the future of oil and gas production on federal lands while accounting for expiring leases. Starting with FY 2021, and assuming that all idle leases will be allowed to expire after reaching the standard 10-year lease expiration, a year-by-year analysis was used to determine how many years the industry can continue to convert idle acres into producing acres at the same rate without any new leasing. The authors determined expiring acres for a given fiscal year using BLM data on leased acres in a given year 10 years prior.