The Biden Administration lost a court battle in February that would effectively impede oil drilling leases by raising their price tag. After lengthy delays and rising gasoline, home heating oil, and diesel prices at the pump, the U.S. Department of the Interior appears ready to move forward, and oil producers want their leases fast-tracked.
“At a time when the administration and allies around the world are calling for more American energy, we welcome the Department of the Interior’s announcement today and urge the administration to hold onshore lease sales under the Mineral Leasing Act with sufficient acreage and fair terms,” American Petroleum Institute senior vice president Frank Macchiarola reportedly said. “We also call on the administration to accelerate the long-delayed five-year program for leasing on the Outer Continental Shelf.”
The White House tried to implement a climate social cost calculation to oil and natural gas leases that would have resulted in cost-prohibitions for drillers. After protracted litigation, Judge James Cain of the Western District of Louisiana barred the Biden Administration from enforcing heightened anti-fossil fuel regulations.
Judge Cain indicated the new rule would “artificially increase the cost estimates of lease sales, which in effect, reduces the number of parcels being leased, resulting in the States receiving less in bonus bids, ground rents, and production royalties.”
That decision was handed down in mid-February, and the Interior Department defiantly pushed back, saying “delays are expected in permitting and leasing for the oil and gas programs.”
More than a month later, Interior spokesperson Melissa Schwartz stated the Interior Department “continues its planning for responsible oil and gas development on America’s public lands and waters,” given the ruling. The administration’s push to increase the use of renewable energy appears to be driven by denying oil producers some opportunities and making others cost-prohibitive.
Recent reports point to a decline in North American rigs, although U.S. numbers have steadily increased to 650 in February after bottoming out during the height of the pandemic at 251. However, these figures are a far cry from the pre-pandemic peak of 805 and record-setting barrels per day above 12 million when the country was considered a net exporter.
It’s not out of the question for U.S. oil production to catch up to rising demand, likely resulting in lower truck diesel prices and curb inflation. On-shore drilling can be completed in 2-4 weeks. If the Interior Department approves the delayed leases, new wells could be producing Texas crude before summer demand spikes. On the other hand, offshore drilling takes considerably longer. Drilling on the Outer Continental Shelf typically requires investments north of $160 million and a drilling process ranging from four months to more than a year. Given the U.S. stands approximately 150 oil-producing wells below energy independence, freight haulers and consumers would likely experience lower prices at the pump sooner by expediting leases.
“Now is the time for this administration to advance policies that incentivize U.S. production and send a clear message that America is open to energy investment,” David McGowan, Southeast Region director of the American Petroleum Institute, reportedly said.
Sources: thehill.com, wsj.com, breitbart.com
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