The Interior strikes back

For a while on Friday I worried I might have nothing to write about this week but then I saw the Biden administration had obliged once again by announcing an oil and gas lease sale on federal lands. As a general rule, I prefer to focus on the EU as its actions have much more immediate implications for my selfish well-being but I couldn’t miss the chance to dissect the news from the U.S.

So, per a press release from the Department of the Interior, the U.S. administration is removing a moratorium on oil and gas drilling on federal lands and preparing to offer some 144,000 acres of such lands to oil and gas drillers. A victory for a troubled industry, perhaps? Of course not.

First of all, the restart of leasing on federal lands is not the next step in the Biden administration’s dance with the U.S. oil industry although one might think it was. No, it was forced by a court ruling from last year, after 13 states sued the White House for the drilling moratorium.

Bloomberg suggested the administration was going against its own energy policy agenda with the restart of lease sales but that was unfair, really. The DOI was forced to restart the lease sales. And it had the freedom to make the new conditions.

“How we manage our public lands and waters says everything about what we value as a nation. For too long, the federal oil and gas leasing programs have prioritized the wants of extractive industries above local communities, the natural environment, the impact on our air and water, the needs of Tribal Nations, and, moreover, other uses of our shared public lands,” said Secretary Deb Haaaland. One could easily guess what follows.

For starters, the 144,000 acres to be made available for leasing are about 20% of the federal lands that were available to the oil industry before the Biden moratorium. For seconds, the government is asking for higher royalties. For thirds, the DOI will incorporate in the terms of future lease sales recommendations made with regard to “ensuring Tribal consultation and broad community input, reliance of the best available science including analysis of GHG emissions.”

I may be wrong but when I read the release, I got the distinct feeling that the restart of oil and gas lease sales on federal land is something that the DOI is not just doing grudgingly. It is something the DOI is doing grudgingly and making sure it will fail. It makes sense, really, given the agenda of the DOI as opposed to the agenda of the oil industry.

What I found confusing, however, was that the Biden administration has been trying to mend fences with the oil industry. And now that same administration is basically telling the industry that it will be allowed to drill on federal lands again but it will take longer (all that input) and it will be more expensive.

From what I know about the U.S. oil industry, it is not really hung on federal lands. Some states (New Mexico) are more dependent on federal land drilling than others but by no means is federal land drilling vital for the industry. It may, however, be important if anyone wants more local production. By sheer coincidence, the Biden administrations seems to want just that. It just seems to be using extremely roundabout ways of motivating this production.

Taking the business perspective again, I doubt there would be many interested bidders for those 144,000 acres to be offered later this week. With oil prices where they are, some companies’ risk tolerance may have increased but the majority would likely continue with their cautious approach to navigating the current political climate in the country and stick to private lands.

The victory, then, falls to the federal government: it managed to comply with the court’s ruling and at the same time discourage its implementation. Yet the question arises as to why the DOI is effectively sabotaging the Louisiana court ruling when the White House has clearly articulated its desire for more local oil production.

The answer to this question is either inhumanly difficult to pinpoint because of the complexity of energy politics or extremely simple, depending on your perspective. As someone who appreciates the simple things in life, the latter perspective is usually my choice.

The reason the DOI is sabotaging the court ruling by trying to make it unattractive for the oil industry to enter new federal lands is that it is sticking to Biden’s original promise to move the U.S. away from fossil fuels. A lot has changed since that promise was made but the leadership at the DOI is sticking to the original script.

The president himself, meanwhile, and the Energy Secretary, too, are working on a new and updated script that involves the cooperation of the oil industry in somehow bringing prices at the pump down to a more palatable level before the November elections.

That’s simply because they tried everything else, with “everything else” here meaning calling on OPEC to pump more and then releasing oil from the strategic petroleum reserve. They are still doing this, by the way, and here I am waiting to see some of the other options on their notorious table.

In all fairness, new drilling on federal lands will do little if anything to help solve the immediate price problem American drivers/voters have. Yet the signal that the DOI has sent the industry with its latest move may have a discouraging effect on those planning to expand production in general.

In other words, while with one hand (DOE), the Biden administration is petting the oil industry, with the other, DOI, it is slapping the industry away from production growth. No wonder production forecasts are contradictory and petrol prices remain above $4 per gallon.

Image credit: Ken Mull