Canceled lease sales raise new questions for offshore drilling

The cancellations of three offshore drilling lease sales this week have injected a degree of uncertainty into the future of offshore drilling.

The canceled auctions mean there are no sales now scheduled, and it’s unclear precisely when that will change. The Interior Department is working on a new leasing plan, but it has not said when that will be issued. 

The decision to cancel the sales comes as the nation is focused on high gasoline prices. Republicans, who hope to win back congressional majorities this fall, have seized on the price hikes to blast the administration for its energy policies.

The administration is conscious of those political attacks, even as it separately gets the squeeze from the left to uphold President Biden’s campaign pledge to ban new oil and gas permitting on public lands and in public waters. 

It’s all created an uncertain outlook for energy firms, which don’t feel positive about the future of lease sales under the Biden administration. 

“It’s clearly not very optimistic as we look to the near term,” said Erik Milito, president of the National Ocean Industries Association, an energy trade group.

The administration announced late Wednesday that it was canceling the three scheduled auctions that would have opened up space in Alaska’s Cook Inlet and the Gulf of Mexico for drilling. 

Spokeswoman Melissa Schwartz said in an email that the sale near Alaska was being canceled because of a “lack of industry interest,” while the Gulf of Mexico sales would not be held because of factors including “conflicting court rulings.”

This cancellations don’t impact any activities related to current oil production, but they do block the industry from getting new leases, which kick off the lengthy process for getting fuel out of the ocean.

The announcement erased the only offshore sales the department had on its agenda. The Interior Department is now putting together a new five-year plan. 

Asked for an update, Schwartz said that the ​​department is “actively developing its five-year plan for the offshore program” and noted that the industry is already leasing 10.9 million acres in federal waters. 

The law governing the offshore leasing requires the Interior secretary to “prepare and periodically revise, and maintain an oil and gas leasing program.”

It specifies that the program should include a “schedule of proposed lease sales” and should be based on the country’s “national energy needs.”

Sara Rollet Gosman, an environment and energy law professor at the University of Arkansas, said that if the Biden administration didn’t want to schedule any lease sales in the forthcoming plan, it could argue that because of climate change, new sales would not be in the nation’s energy needs.

“I think the federal government can make a good argument that our national energy needs have changed, and that renewable energy should be our focus and that therefore we do not need to have a schedule of proposed lease sales,” she said.

Gosman described it as a “viable” argument, though it would surely face legal challenges.

She said the administration could also take a more “cautious” approach of having “a five-year schedule of just a few lease sales.”

One possible clue to the department’s plans for at least the near future might be found in its budget request for fiscal 2023 — which projects a 94 percent drop in bonuses and rents the department would collect from offshore oil and gas leasing. 

Milto, of the National Ocean Industries Association, said he reads this as the department not planning to hold any oil and gas lease sales during that fiscal year, which ends in October 2023.

And he and his association argue it will hurt the nation’s energy development.

“The Biden Administration FY2023 budget shows that they’re not expecting lease sales in 2022 or 2023,” Milito said in a statement. “These are simply regressive policy decisions that are creating massive delays in American investment, energy, and employment opportunities.” 

Schwartz, the department spokesperson, described the budget projection as just a placeholder, given both pending litigation and the ongoing development of the leasing plan. 

Upon the announcement of the canceled sales, Republicans and industry slammed the decision, seeking to connect the issue to soaring gasoline prices. 

“President Biden’s administration is actively making high gas prices worse,” Sen. Bill Cassidy (R-La.) said in a statement. “When we need to unleash American energy production, the Biden administration kills opportunities at every turn.”

However, the cancellations are not expected to impact current oil supply or prices since it usually takes seven to 10 years for offshore leases to actually produce fuel. 

Meanwhile, environmentalists are calling for offshore drilling to be stopped entirely, as leading scientists say major cuts to the world’s fossil fuel use are necessary to limit climate change.

“I would hope that President Biden would keep his campaign promise to end offshore leasing,” said Miyoko Sakashita, director of the Center for Biological Diversity’s oceans program. 

“There shouldn’t be any new federal leasing. If anything, there needs to be a plan to phase out the existing production,” Sakashita added. 

So far, she said she’s seeing “mixed signals” from the administration, as it has canceled the offshore leases, but it recently announced upcoming onshore oil and gas lease sales. 

“I have seen mixed signals from this administration, which makes it very difficult to predict what a new five-year plan will look like,” Sakashita said.