Republicans question legality, revenue impacts of Biden’s oil and gas leasing pause

Mont. Sen. Steve Daines said the pause has had ‘a chilling effect’ on developers

Oil and gas leasing in Utah
A federal judge has ordered the Biden administration to restart regular sales of oil and gas leases, forcing the administration to prematurely abandon a central piece of its climate change agenda. (Courtesy of the Bureau of Land Management)

Republicans on the U.S. Senate Energy and Natural Resources Committee excoriated the Biden administration’s pause of new oil and gas leasing at a hearing Tuesday, illustrating the political pressure the administration faces as it reviews federal energy development policy.

Under intense questioning from Republicans about the revenue impacts, legality and duration of the leasing pause, Nada Culver, the Bureau of Land Management’s deputy director for policy and programs, conceded little ground. 

Culver said the review was focusing on the royalty rates and climate impacts of oil and gas development on federal lands, but did not offer early hints at findings or an estimate of an end date.

Chairman Joe Manchin III, (D-W.Va.), opened the hearing by saying that the moratorium was only a pause, and noted that the BLM, an Interior Department agency that oversees oil and gas leases, had approved 500 new permits to drill on already-leased land in February and March.

But that did little to comfort the committee’s Republicans, including ranking member John Barrasso of Wyoming, who repeatedly characterized it as a back-door prohibition.

“This is not a pause or a review, this is a ban, and currently there is no end in sight,” Barrasso said. “President Biden’s plan to end oil and gas leasing on public land will devastate the economies and communities of Wyoming and New Mexico and many other states.”

U.S. Sen. Steve Daines, (R-Mont.), said the pause has had “a chilling effect” on oil and gas developers, who see it as an indication that the administration is hostile to the industry.

The pause affects only new leases and does nothing to change existing operations or even the issuance of drilling permits on land that has already been leased. Oil and gas companies hold leases for 13.9 million acres that are undeveloped, Culver said.

“There’s no direct effect on revenues from leases because of the moratorium, because that’s future looking,” U.S. Sen. Angus King, (D-Maine), said.

Culver said others have estimated a pause of “several years” would have little fiscal impact, though the BLM has not made its own estimate.

Interior Secretary Deb Haaland said at a White House briefing last week that the administration did not have an end date for the pause, and Culver did not specify one on Tuesday.

Asked directly by U.S. Sen. John Hoeven, (R-N.D.), when the pause might end, Culver said only that the review was ongoing.

Environmental groups, including Environment America, which is part of the liberal Public Interest Network, have advocated for making the ban permanent. The U.S. Geological Survey found in 2018 that oil and gas extraction on federal lands contributes nearly one-quarter of the country’s greenhouse gas emissions.

Differences over emissions, revenue impacts

Advocates on either side of the issue disagree on some basic facts, making agreement on a course of action that much more difficult.

For example, Barrasso and Kathleen Sgamma, the president of the industry group Western Energy Alliance, said energy development on federal lands accounts for less than 1% of national greenhouse gas emissions — not the nearly 25% the government cites.

That difference stems from the way that emissions are counted. The lower figure tallies only emissions that come directly from extraction, while the larger number includes emissions from end uses.

Republicans, including Daines on Tuesday, and the energy industry often argue that ending development on federal lands would do little to limit end-use emissions because the demand for oil and gas would be filled through other sources, including from countries with less stringent environmental standards.

Wyoming Gov. Mark Gordon, a Republican, testified that his state has already felt an economic impact from the leasing pause, losing out on about $2.8 million from the cancellation of the first two quarterly lease sales of 2021.

New Mexico Gov. Michelle Lujan Grisham, a Democrat, has also written to Biden about the fiscal impacts the pause may have on her state. Nearly two-thirds of the state’s oil and gas production comes from federal lands, according to the letter.

About half of revenue from federal oil and gas leases goes to the states where the leases are issued, with most of the rest going to federal conservation programs.

U.S. Sen. Mark Kelly, (D-Ariz.), asked Tuesday whether Congress needed to plan for the budgetary effects on federal programs if the pause continued.

Culver said the BLM did not anticipate revenue losses in the short term, including if the pause continues through the summer.

Republicans also questioned whether the pause is legal.

Federal law requires the government to hold lease sales quarterly, so the administration does not have the authority to cancel them, U.S. Sen. Mike Lee, (R-Utah), said.

Noncompetitive leases

In her opening statement, Culver listed a few specific policies on which the Interior Department’s review was focused. She included the royalty rates companies pay on the revenue they receive from extraction on public lands, which was set more than a century ago, and the bonding rates companies pay into a fund used to reclaim and cap wells in case a company goes bankrupt.

The department is also looking at the issue of noncompetitive leasing, a practice that allows federal parcels that failed to sell at auction to be purchased for $1.50 per acre.

U.S. Sen. Catherine Cortez Masto, (D-Nev.), raised the question of leasing lands that have low potential for oil and gas development, which she said wasted the BLM’s time and returned little to taxpayers. It also stops the land from being used for other purposes like conservation and recreation, she said.

Culver answered that most low-potential leases are sold through the non-competitive process.

Manchin said that system “makes no sense” to him.