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More Details From Biden’s Oil Sale To China

July 14, 2022 by Leave a Comment

It is not enough that China is buying Russian oil at a discount due to western sanctions put on Russia because of its invasion of Ukraine, but now President Biden’s Department of Energy is selling China oil from the U.S. Strategic Petroleum Reserve (SPR)—a source that is meant for national emergencies that Biden has been depleting since last November in hopes to lower gasoline prices that have been escalating due to his energy policies.

The SPR was established by the 1975 Energy Policy and Conservation Act to help the U.S. mitigate the impacts of future “severe energy supply interruptions.” But, Biden has sold more than five million barrels of oil from the SPR to European and Asian nations instead of U.S. refiners, compromising U.S. energy security. Biden’s Energy Department in April announced the sale of 950,000 barrels from SPR to Unipec, the trading arm of the China Petrochemical Corporation, which is wholly owned by the Chinese government.  China purchased that oil from U.S. emergency reserves to bolster its own stockpile. China has been buying large amounts of oil for its reserves since the early COVID lockdowns when prices were low due to demand destruction.

Biden ordered the Department of Energy to release a total of about 260 million barrels of oil stored in the SPR over the last eight months. The SPR’s level has fallen to about 492 million barrels of oil, the lowest level since December 1985, according to the Energy Information Administration. The current level is 20 percent lower than its level recorded days prior to Biden’s first release in late November.

That is in contrast to President Trump, who in March of 2020, ordered the Department of Energy (DOE) to fill the SPR to its maximum capacity by purchasing 77 million barrels of American-made oil beginning with an initial purchase of 30 million barrels.

Other SPR Shipments Abroad

According to U.S. Customs data, about 470,000 barrels of oil from the Big Hill SPR storage site in Texas was shipped to Trieste, Italy, which is the source of a pipeline that sends oil to refineries in central Europe. Atlantic Trading & Marketing, an arm of French oil major Total Energies, exported 2 cargoes of 560,000 barrels each. Cargoes of SPR oil were also exported to the Netherlands and to a refinery in India, and a third cargo was headed to China. At least one cargo of oil from the West Hackberry SPR site in Louisiana was set to be exported in July, according to Reuters.

China Aids Russia through Energy Purchases

China spent $18.9 billion on Russian oil, gas and coal in the three months that ended in May—almost double the amount from a year earlier, according to customs data. The higher spending is helping make up for decreased purchases from the United States and other nations that have stopped or slowed buying Russian energy because of its invasion of Ukraine. China is buying essentially everything that Russia can export via pipelines and Pacific ports, according to the Finland-based Center for Research on Energy and Clean Air that has tracked Russia’s energy flows since the start of the war. China is the world’s biggest energy importer and has dedicated pipelines for Siberian oil and gas. It has also contracted for larger amounts, which new pipeline infrastructure will deliver. Even as its energy consumption was curbed over the first half of 2022 mainly due to COVID-19 lockdowns, China spent far more on Russian energy due to higher prices and small increases in volumes. Russia has long-standing trade and strategic relationships with China, and along with offering steep price discounts is also accepting payments in local currency to help keep trade flows strong.

China’s imports of Russian oil increased 28 percent in May from the previous month, hitting a record high and helping Russia overtake Saudi Arabia as China’s largest supplier. Although South Korea and Japan have cut back on Russian oil, those volumes are a fraction of what is being bought by China and India. The shift has allowed Moscow to maintain its production levels. Despite Russian oil being sold at a steep discount, soaring energy prices have led to an increase in oil revenue for Russia, which took in $1.7 billion more in May than it did in April, according to the International Energy Agency.

Source: Centre for Research on Clean Energy and Air

Russian oil sales dropped by 554,000 barrels a day to Europe from March to May, while Asian refiners increased their take by 503,000 barrels a day — nearly a replacement of one for one. Of those, 165,000 barrels are going to China from eastern Russian ports instead of the Baltic and Black Sea ports that traditionally supply Europe. Russian sales to India reached a record 841,000 barrels a day in May, eight times the annual average from last year. J.P. Morgan commodities experts estimate that China can buy an additional million barrels of Russian oil a day as China recovers from COVID lockdowns and adds to its strategic oil stockpiles with cheap Russian oil. Russian Urals oil is selling for a $30 discount to Brent oil.

Conclusion

The emergency reserves of oil that are in the Strategic Petroleum Reserve are designed for international crises or for natural disasters, instead of being used for mitigating bad energy policy as Biden is doing. Some have suggested that he has transformed the SPR into the “Strategic Political Reserve,” implying his sales are political responses to his aggressive assaults against domestic energy production. With Biden supplying global oil markets with U.S. oil from the Strategic Petroleum Reserve, he is depleting our oil reserves and hurting U.S. national security, while China is adding to its national reserves by buying SPR oil from Biden’s Department of Energy and by also buying cheap oil from Russia.

*This article was adapted from content originally published by the Institute for Energy Research.

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Democrats Are ‘Working Like the Devil’ to Raise Gas Prices

July 11, 2022 by Leave a Comment

As talks intensify on the once ambitious “Build Back Better” reconciliation measure, the conversation has shifted towards how to pay for a slimmer, but no less disruptive package of subsidies for wind, solar, electric vehicles, and other non-energy related measures. The Democrats would be satisfied to raise corporate taxes.  Some in the business community, however, are rumored to be lobbying the Democrats to tax energy instead. Enter S. 2378, a proposal by Senator Chris Coons (D-DE) to levy a carbon tax on certain imports, or more directly to tax our energy.

Styled as the FAIR Transition and Competition Act, the bill promises to jack up gasoline prices as much as a $1.50 per gallon and increase the price of steel, aluminum, cement, other fossil fuels, and the products made from them. The ostensible purpose of the bill is to protect U.S. producers in the steel, iron, aluminum, cement, and fossil fuel industries against competition with producers in other countries. Whatever the real purpose, the upshot is another raid on the pocketbooks of American families who are already being crushed by the weight of the highest inflation in decades.

The Coons bill is small by Washington standards at just 19 pages, but what it lacks in size it more than makes up in potential damage to the economy. In typical D.C. fashion, the measure passes the most important decisions off to bureaucrats even though just last week the Supreme Court cautioned against this sort of power handoff. It also slips in a bypass-SCOTUS-free card to the EPA with respect to the regulation of greenhouse gasses and encourages an interstate competition to exaggerate climate impacts.

The bill would create a set of carbon tariffs for each affected industry. These tariffs would be levied on imports for the affected industries from non-exempt countries. The bill does not stipulate what the tariffs would be nor which countries would be exempt. Instead, it creates multiagency processes to make these critical determinations. This is a recipe for a lobbyist feeding frenzy to influence each stage of every determination.

The stated intent is to have a carbon tariff that matches the costs domestic producers bear in order to meet our climate regulations at all levels of government. Though the bill is vague, we can use projected EPA climate guidelines to estimate possible impacts on the price of gasoline.

Within a month of Inauguration Day, the Biden Administration created the Interagency Working Group on Greenhouses Gases (IWG) and published a technical support document (TSD) to guide the regulatory agencies until the IWG makes a final determination. In theory, the social cost of carbon (SCC) calculates damages done by a metric ton of carbon dioxide between its emission and some arbitrary time in the future (typically centuries or more later).

Federal regulatory agencies are to use the SCC in their cost-benefit analysis for setting policy or judging projects involving carbon-dioxide emissions. In a theoretical optimum, the network of regulations would restrict fuel production and consumption to the levels achieved by a carbon tax equal to the SCC. In practice, the regulations can be clumsier and involve compliance costs beyond those needed to actually reduce the emissions.

In short, the SCC is a reasonable first cut at projecting how large the carbon tariff might be. The table below, from Page 5 of the TSD, shows that this tariff could be very large.

Using fatally flawed logic, the authors of the TSD omit a column using a 7 percent discount rate, which would reduce the SCC to a trivially low number. That same flawed logic almost guarantees that IAWG’s final report will not choose any number from the 5 percent column as the regulatory guideline. Using the 2025 values of $56/ton, $83/ton, and $169/ton are not implausibly high proxies for the proposed carbon tariff. Indeed, a Brookings study suggests an upper range of SCC values that exceed $1,500/ton.

Though the U.S. is a net exporter of petroleum and petroleum products combined, it is still a net importer of crude petroleum, a significant portion of which comes from countries unlikely to meet the requirements for exemption. Levying a carbon tariff on imported petroleum would not only raise the price of imported oil, but also the price of domestically produced oil since market price is determined by the marginal unit supplied.  In this case, the marginal barrel would be the imported barrel. This higher price works its way through the supply chain and increases the price of gasoline by $0.09/gallon for each $10 of the carbon tariff.

Simple multiplication shows that a carbon tariff set equal to the IWG’s 2025 SCCs would add between $0.50 and $1.52 to the per-gallon price of gasoline and slightly more for diesel and jet fuel. This carbon tariff could add hundreds of billions of dollars per year to consumer energy costs. Much of this increased cost would go to petroleum producers, who could be expected to offer little resistance to this carbon tariff, but there would also be tens of billions of dollars of tariff revenue that the bill earmarks for a variety of uses.

The bill allocates the tariff revenue to states, in part, by climate impacts the states suffer. Though the extreme weather that supposedly causes these climate impacts have no upward trends, the allocation formula gives states an incentive to create bureaucracies to find climate costs anyway.

The competition for these climate-damage payouts would help exaggerate climate impacts and would be used to further support the climate agenda. There was a similar incentive with the U.N. Green Climate Fund, and it led to a bizarre claim by a landlocked country that it suffered damages from sea-level rise, which was dutifully reported as fact.

Finally, as alluded to above, the bill includes an innocuous appearing five-word section that could repurpose the Clean Air Act. In a recent ruling (WV vs. EPA), the Supreme Court disallowed the use of minor sections of legislation for major policies, requiring Congress to make such uses explicit in legislation. This ruling has many legal experts predicting the Supreme Court will overturn Mass vs. EPA, which has allowed the EPA to use a section of the Clean Air Act to justify broad and costly CO2 policies. When referring to climate legislation, the Coons bill says, “including the Clean Air Act,” which could easily be viewed as explicit congressional direction. Were the Coons bill to pass, supporters of unchecked regulatory power would have a much stronger case against overturning Mass vs. EPA.

Though the Coons bill is short, the implications and impacts would be large. We could expect the cost of petroleum products alone to rise by hundreds of billions of dollars per year. Transfers of this size invariably lead to additional waste as special interests compete for protection and revenue. None of this is good for American energy consumers who are already burdened with record prices, although it is great for the growth of government power and revenue.

*This article was originally published by the Institute for Energy Research.

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The Unregulated Podcast: #91 Secret Plan

July 11, 2022 by Leave a Comment

On this episode of The Unregulated Podcast, Tom Pyle and Mike McKenna disscuss President Biden’s “secret plan” to defeat inflation and other headlines from this week.

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Setting The Story Straight On Energy

July 7, 2022 by Leave a Comment

The Biden administration has recently called on America’s natural gas and oil companies to invest billions of dollars into increasing production, BUT at the same time, President Biden and his cronies are promising to run them out of business in the next few years!

It’s time for Biden to get his story straight on American energy production.

Use the tools below to send a message to the White House demanding Biden abandon his failed energy policies and start supporting American producers in earnest!

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Biden Buries Restrictive Lease Plan Under Holiday Weekend

July 6, 2022 by Leave a Comment

President Biden’s Department of Interior released its draft offshore lease plan late on  July 1—just before the Fourth of July holiday, as American families were paying historically-high gasoline prices for their travels.  The plan is required by law and a final plan was due by June 30, when the current plan ended. The draft plan lays out several options for public input regarding the number of offshore oil and gas lease sales that should be held over the next five years, ranging from zero to eleven. In total, the draft plan has ten potential new leases in the Gulf of Mexico and one in the Cook Inlet off the southern coast of Alaska. There are no new leases in federal waters off the Atlantic and Pacific coasts. Biden’s plan is in sharp contrast to President Trump’s proposed offshore lease plan that had 47 new offshore drilling leases, including in the Atlantic and Pacific oceans. President Trump had proposed a vast expansion of drilling sales to cover more than 90 percent of coastal waters, including areas off California and new zones in the Atlantic and Arctic. The earliest Biden’s offshore lease program could be finalized is likely late fall.

President Biden claims he is doing all he can to bring down gasoline prices, but he does not offer up what counts—providing a means to obtain new domestic oil supplies or ending his official policies to “end fossil fuels.” Instead, he canceled the Keystone XL pipeline, uses up emergency oil supplies in the Strategic Petroleum Reserve, begs OPEC to boost production, demands refiners to raise output when they are already producing at high rates, calls on oil companies to expand production under existing leases, and asks Congress to approve a gasoline tax holiday. All of this is in an effort to convince Americans that he is doing all that he can without making any sizeable contribution to gasoline prices that were less than half their recent high when Biden took office.

That’s because Biden does not want to increase domestic production. Instead, he prefers we import oil from OPEC, Iran or Venezuela. In fact, Biden vowed to suspend all new federal drilling on public lands and waters, but had to change that position when legal challenges from several states and oil companies resulted in a judge indicating that he did not have that power. It is also not because he is keeping federal waters pristine since he is pushing for offshore wind, despite the fact that hurricanes can affect them as well and cause unwanted materials to land in U.S. waters. Biden wants 30 gigawatts of offshore wind turbines in federal waters by 2030. To reach that goal, the Biden administration recently launched a partnership with a half dozen state governors to accelerate offshore wind along the East Coast—an area forbidden to oil leases.

Biden Has Held One Offshore Lease Sale

The Interior Department’s most recent offshore oil and gas auction was in November in the Gulf of Mexico. Shell, BP, Chevron and Exxon Mobil offered $192 million for the rights to drill on 1.7 million acres of oil and gas leases in the November 17 lease sale. However, a court order later vacated the sale, arguing that the administration did not adequately account for the climate effects of the oil and gas consumption that would result from the lease sale. The Biden administration did not appeal the decision, which is not surprising because they only held the sale after being ordered to by another federal judge.

Instead, the Interior Department canceled 3 oil and gas lease sales in the Gulf of Mexico and Alaska’s Cook Inlet. According to the Interior Department, the Cook Inlet lease sale did not proceed due to insufficient industry interest and the planned sale of two leases, lease 259 and lease 261, in the Gulf of Mexico did not proceed due to contradictory court rulings on the leases. The Alaska lease would have covered more than 1 million acres that would provide oil for 40 or more years of production. These cancellations came when the national average price of regular gas hit a high of $4.418 a gallon, and with the CPI increasing almost 15 percent since Biden took office.

Conclusion

Under federal law, auctions of offshore oil and gas drilling rights can only be held under the formal five-year plans. It is clear congressional law that directs the Interior Department to expeditiously lease the Outer Continental shelf: “the outer continental shelf is a vital national resource reserve held by the Federal Government for the public, which should be made available for expeditious and orderly development subject to environmental safeguards, in a manner which is consistent with the maintenance of competition and other national needs.”

The Biden draft plan is an initial but tentative step in the process, and appears to be the minimum possible movement to hold off a lawsuit regarding their failure to follow the law. Following a 90-day period for public comment, the Bureau of Ocean Energy Management will put together a proposal for the final program for the Interior Secretary to review and approve within a minimum of 60 days. Biden’s final program, however, may not actually authorize any lease sales, which would be to the detriment of the American public, who actually owns U.S. federal lands and waters and depends on oil for 36 percent – the largest percentage – of its energy supply.

As API Senior Vice President of Policy, Economics and Regulatory Affairs Frank Macchiarola said, “Because of their failure to act, the U.S. is now in the unprecedented position of having a substantial gap between programs for the first time since this process began in the early 1980s, leaving U.S. producers at a significant disadvantage on the global stage and putting our economic and national security at risk.”

*This article was adapted from content originally published by the Institute for Energy Research.

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Will America Learn From Europe’s Energy Failures?

July 1, 2022 by Leave a Comment

Russian natural gas supply to Europe via the Nord Stream 1 pipeline capacity fell to 40 percent recently as Russia cut flows awaiting the return of equipment sent to Canada for repair and warns that more delays in repairs could lead to cutting all flows, putting additional strain on Europe’s ability to refill its natural gas inventories and raising prices by 40 percent. Gazprom, the state-controlled gas company, indicated that Western sanctions made it impossible to secure the return of equipment from Canada for the pipeline’s Portovaya compressor station. Built as the world’s longest subsea pipeline during Barack Obama’s presidency, Nord Stream 1 has the capacity to pump about 55 billion cubic meters annually to the European Union, which last year imported about 140 billion cubic meters of gas from Russia via pipelines. Germany’s gas inventories, for example, are 52 percent full and need to be 80 percent full by October and 90 percent full by November.

Also affecting gas inventories in Europe is U.S. LNG production, which has provided Europe with LNG imports to help with their reductions from Russia. Europe accounted for 74 percent of U.S. LNG exports in the first four months of 2022. However, an explosion on June 8 hit the Freeport LNG facility in Texas, resulting in a fire that caused the plant to be taken offline until September when part of the facility will be operating again with full operation set to resume at the end of the year. The Freeport facility was a major supplier of LNG to Europe and accounts for about 20 percent of U.S. LNG exports. That timeline for the Freeport facility to come back online could be delayed because regulators must approve the facility’s restart and two investigations are ongoing into the cause of the disruption at the plant. Additionally, the Federal Energy Regulatory Agency is investigating whether to require that LNG projects include estimates of climate impacts, which could also affect permitting and timing of repairs.

Germany’s Dependence on Russian Energy

Germany for decades had bet that economic interdependence with Russia would keep peace in Europe and that Russia could be trusted as a supplier of energy. President Trump even warned Germany of its growing dependency, which led Germany and their friends in U.S. media to scoff at his prescient prediction. Russia’s invasion of Ukraine changed that and vindicated Trump’s view.  Germany had relied on Russia for more than half of its gas imports, a third of its oil and half of its coal imports. Germany is now taking steps to make itself independent from Russian coal by the end of summer, and from Russian oil by the end of the year. The share of oil imports from Russia has fallen to 20 percent, and Russian coal imports have been halved.

But, reducing its dependence on Russian natural gas will be harder to achieve, possibly taking two years. Germany imports about 35 percent of its natural gas from Russia, down from 55 percent before the war, using most of it for heating and manufacturing. Last year, power generation using natural gas accounted for about 15 percent of the country’s electricity. Germany plans to restart coal-fired power plants it has been closing because of its “Green Transition” and to offer incentives for companies to reduce natural gas consumption so households do not run out of gas this coming winter. The legislation affecting the use of coal is expected to be approved on July 8 in the Bundesrat, the upper house of parliament, and will expire on March 31, 2024. The German government is also expected to introduce an auction system that would motivate industry to reduce gas consumption, which will begin this summer. The steps are part of a broader strategy aimed to reduce gas consumption and divert gas deliveries to storage facilities to ensure that the country has enough reserves to get through the winter.

Other European Dependence on Russian Gas

Both the Czech Republic and Austria are among Europe’s most vulnerable countries when it comes to Russian natural gas, relying on Russia for almost all their natural gas supplies. The Czech Republic’s main gas provider, CEZ, reported that its supplies from Gazprom had been reduced to about 40 percent of its usual volume, and the country’s reserves could last until the end of October. Austria’s OMV energy company was also cut. Italy, which imports 95 percent of its gas, buys 40 percent of it from Russia. Gazprom’s supply to Italy also fell due to the reduced flows through the Nord Stream 1 pipeline connecting Russia to Germany. But Italy, which benefits from milder winters than its northern neighbors, is in a better position to attract alternative supplies via pipeline and by ship. Italy was proposed to be a recipient of natural gas from Israel and Cyprus via the East Med pipeline, however, the Biden administration withdrew its support for the pipeline shortly before Russia invaded Ukraine.

In Holland, the government declared an “early warning” stage of a natural gas crisis, a move that will allow more electric power to be generated by burning coal. According to the Dutch government, there were as yet “no acute gas shortages” in the Netherlands but declining supplies “could have consequences.”

Europe’s Gas Storage Inventory

European member states together have 1,100 terawatt-hours—or around 100 billion cubic meters—of storage capacity spread across about 160 underground facilities in 18 countries. The stored fuel typically covers 25 percent to 30 percent of winter demand. More than 70 percent of that underground capacity is concentrated in Germany, Italy, Austria, the Netherlands and France. To ensure winter supplies, European officials agreed on requiring E.U. underground reservoirs to reach 80 percent by November. If they stay at current levels, Europe will struggle to reach 70 percent of storage capacity by then, and a cold winter could turn catastrophic for energy consumers.

Source: Wall Street Journal

Conclusion

Europe is dependent on Russian energy, particularly natural gas. And due to Russia’s invasion of Ukraine, Europeans are trying to reduce that dependence quickly. But, the goal is proving hard to achieve, particularly when the continent wants to transition from fossil fuels as part of its commitment to reduce carbon dioxide emissions. Politicians in Germany are keeping idled coal plants up and running and planning to auction natural gas to industry to try and reduce gas consumption. Europe’s natural gas storage facilities are currently just over 50 percent fuel and they need to get that to 80 percent by November. But, Russia’s reduction of gas flows to Europe via the Nord Stream I pipeline is making it difficult to fill those reservoirs to that level.

Energy is serious business for national security and economies, industrial production, jobs, and life itself.  Europe’s commitment to intermittent and unreliable “part-time” green energy is exposing all of these realities and should be providing U.S. policymakers the proof of the pitfalls of this course of action.  Unfortunately, there are no signs the Biden administration is concerned about the destabilizing nature of unreliable energy.

*This article was adapted from content originally published by the Institute for Energy Research.

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The Unregulated Podcast #90: Natural Law

June 30, 2022 by 1 Comment

On this episode of The Unregulated Podcast, Tom Pyle and Mike McKenna discuss Team Biden’s latest ideas on how to tackle inflation, energy prices, and the crisis in Europe, as well as the latest round of decisions from the Supreme court.

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Supreme Court Denies Broad EPA Authority To Regulate Greenhouse Gases

June 30, 2022 by Leave a Comment

Chief Justice Roberts Writes for a Six-Justice Majority in West Virginia v. Environmental Protection Agency

WASHINGTON DC (06/30/2022) – Today, the Supreme Court decided West Virginia v. Environmental Protection Agency. Chief Justice Roberts wrote the Court’s opinion concluding that the EPA lacks broad authority to regulate greenhouse gas emissions from power plants under the Clean Air Act.

AEA Director of Policy and Federal Affairs Kenny Stein issued the following statement:

“The Court’s decision today merely confirms what AEA and other critics of the Clean Power Plan have long pointed out: prior to the Obama administration, section 111(d) of the Clean Air Act had never been construed to grant EPA the power to remake the nation’s electricity system. The 2015 ‘discovery’ of this vast power was clearly an attempt to rewrite the CAA to give EPA the power that Congress had declined to give it. The Court correctly notes that vast regulatory authority must be expressly given by the people’s representatives in Congress. The Biden administration should take this message to heart and abandon its ‘whole of government’ regulatory adventurism.”

AEA President Tom Pyle issued the following statement:

“From the start, the Clean Power Plan was all about the administrative state waging war on reliable and affordable energy sources. The Court’s decision today makes it clear that the EPA, as well as other regulatory agencies, do not have sweeping authority to reorder the entire U.S. power sector under the Clean Air Act.

This decision is also critical for democracy. Congress, as the People’s democratically elected representatives, needs to authorize regulatory agencies to act. If President Biden wants EPA to act on climate, then it is time for President Biden to craft a plan and have Congress vote on it. Now, the American people can decide this issue through their elected representatives in Congress, as the Constitution envisioned.”

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Biden Works To Cut Off Domestic Energy Supplies Even As Court-Mandated Lease Sales Begin

June 29, 2022 by Leave a Comment

The Energy Information Administration (EIA) forecasts that nine new fields will come online in the deep waters of the Gulf of Mexico this year, which will account for 5 percent of natural gas production and 14 percent of oil production in U.S. federal Gulf of Mexico waters by the end of 2023. However, EIA expects that the additional capacity from these new fields will not sustain oil production at levels similar to the end of 2021 in offshore fields. According to EIA, declining production from existing Gulf of Mexico fields will largely offset the increases in oil production from the new fields, with natural gas production in the Gulf of Mexico continuing its three-year decline. During 2021, 15 percent of U.S. oil production and 2 percent of U.S. natural gas production was produced in the Gulf of Mexico.

The Biden administration has not had a successful offshore lease sale since Biden’s inauguration—lease sales that are required by federal law—because the only offshore lease sale held in November 2021 was invalidated by a federal judge a few months later. The Biden administration has not contested the judge’s decision, which was that climate change was not adequately considered in the sale. In fact, the Biden administration only held the sale after being ordered to do so by another federal judge.

Earlier this year, the Biden administration canceled lease sales in federal waters off Alaska’s Cook Inlet, citing a lack of industry interest. On top of those actions, the Biden administration has yet to provide an offshore lease plan for new oil and gas leases in federal waters that is required by law every 5 years.  The Department of Interior indicates that a draft of one will be provided by June 30, 2022, but will include an option of no lease sales. The Biden administration continues to withhold oil and gas supplies from the American public.

Source: Energy Information Administration

EIA Gulf of Mexico (GOM) Forecast

EIA expects that GOM natural gas production will average 2.1 billion cubic feet per day in 2023, down 0.1 billion cubic feet per day from 2022 and that GOM oil production will average 1.8 million barrels per day in 2023, about the same as in 2022. There are no GOM fields scheduled to start production in 2023. The nine fields coming online in 2022 include those at Argos/Mad Dog 2, Vito, Lobster, Dome Patrol, Olympus, Taggart, and the Kings Quay fields.  The large development fields at Argos/Mad Dog 2, King’s Quay, and Vito each has a peak production capacity of at least 100,000 barrels of oil equivalent per day. Eight of the nine new fields in the GOM will produce both oil and natural gas by year-end and the ninth field will produce only oil. Offshore producers have made significant progress simplifying and standardizing floating production systems and collaborating with various partners, including overseas construction services companies, to reduce costs and remain competitive with onshore producers.

Source: Energy Information Administration

Since the late 1990s, new development in the GOM has been targeting oil-bearing reservoirs. Most of the natural gas produced in the GOM comes from associated-dissolved natural gas production in oil fields instead of natural gas fields. In 2020, gross withdrawals of natural gas in the GOM that came from natural gas wells accounted for less than 30 percent of total GOM natural gas production, compared with 76 percent in 1999.

Required Offshore Lease Plan

Shortly after taking office, President Biden signed an executive order to pause the issuing of new leases, but a successful legal challenge from western states forced the administration to hold new lease sales. The new offshore lease plan, however, is likely to block new drilling in the Atlantic and Pacific oceans; the eastern Gulf of Mexico has been closed to drilling since 1995. At issue is whether to allow lease sales in parts of the Arctic Ocean as well as the western and central Gulf of Mexico. During his campaign, Biden pledged to end new drilling on public lands and in federal waters. The draft five-year plan for the National Outer Continental Shelf Oil and Gas Leasing Program is expected to include several options, including a “no action alternative” — that would not offer any new lease sales.

Areas made available for leasing under the new plan would be auctioned through 2027. Once the Interior Department’s Bureau of Ocean Management releases the draft five year plan, it will be subject to a period of public comment before it is finalized.

According to Erik Milito, president of the National Ocean Industries Association, new leases in the Gulf of Mexico could mean an additional 2.4 million barrels of oil a day, which can impact the global marketplace. For example, oil prices dropped by over $9 a barrel in 2008 when President George W. Bush opened the Outer Continental Shelf to oil drilling, signaling he wanted more supply to be produced. Biden could get similar results if he truly wanted more investment in oil production and made a proposal that clearly showed it. Instead, Biden has offered a temporarily pause on the federal gas tax that needs to be approved by Congress, released oil from the strategic petroleum reserve, and suspended a ban on summertime sales of ethanol-gasoline blends. None of these actions encourages new oil development or produced a single barrel of new oil production.

Recent History of Offshore Leases

Both the Obama/Biden and the Biden/Harris administrations have tried to block new offshore production. President Obama banned drilling in portions of the Arctic Ocean’s Beaufort and Chukchi Seas, and later invoked an obscure provision of a 1953 law, the Outer Continental Shelf Lands Act, to also ban drilling in areas along the Atlantic coastline. President Trump tried to open all coastal waters of the United States to oil and gas drilling, including the areas kept off limits by the Obama administration, but was unable to make that happen.  Due to pressure from coastal states, President Trump signed an executive order that prohibits drilling for 10 years off the coasts of Florida, Georgia, South Carolina and North Carolina. This, unlike Biden’s actions, happened at a time of low oil prices because of the huge increases in production the United States enjoyed on its way to energy independence reached in 2019.

President Biden signed a pause on drilling on federal lands and waters during his first weeks in office, calling for a review of the program that ended up increasing royalties for onshore production by 50 percent and also increasing rents. New onshore royalties will be 18.75 percent, matching those for offshore which were hiked by the Obama/Biden administration. President Biden in his 17 months in office has not had a successful offshore lease sale and all indications is that he would like to continue in that direction.

Conclusion

According to EIA, declining production from existing GOM fields is expected to be greater than the increase in production from new fields for natural gas and to be equal for oil. With no new fields coming on line in 2023, offshore oil production may decline as natural gas production is doing in the GOM. And with a hold on leasing federal lands and waters the share of energy produced from those areas will continue to lag the production from state and private lands.

Biden’s Interior Department is supposed to release a 5-year lease plan by the end of this month that will include a no lease sale option despite the plan and lease sales being required by law. Biden and his administration clearly do not want to encourage investment in new offshore oil fields and are doing everything possible to decrease production, contrary to what they state.  Cutting off domestic energy supplies and begging foreign nations to produce more oil seems to be the Biden administration’s policy.

*This article was adapted from content originally published by the Institute for Energy Research.

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Even After Russian Invasion, Biden Slow Walks Lease Sales

June 27, 2022 by Leave a Comment

Between August 2021 and February 2022, President Biden’s Bureau of Land Management’s approval of drilling permits was low, averaging about 200 per month. After Russia invaded Ukraine, however, the approvals picked up with 473 approved in March and 357 approved in April. Those approvals were still much less than the 600+ approved in April and May 2021. And, there is still a large number of pending permits: over 4,400. Biden’s call on U.S. oil and gas producers to drill more — and his ban on Russian oil imports — focused attention on the administration’s handling of the federal oil program, which constitutes 22 percent of the national supply. It appears Biden directed Interior Secretary Haaland to pick up the pace of permitting to mollify the political pressure rising along with pump prices.

Source: Bureau of Land Management

Receiving a permit to drill is a necessary step for oil and gas companies to undertake once they have purchased a lease. However, the determination to drill depends on many factors including finances, local regulations, the availability of materials such as steel, and worker availability. Workforce availability and supply chain issues are currently obstacles to oil field development, as they are in many other industries. Also, given that the Biden administration has said repeatedly that its policy is to end drilling on federal lands, the oil and gas industry is “skeptical” regarding the true nature of the approvals and whether further investment is in their economic interest. This is particularly true since the Biden administration has increased royalty rates from 12.5 percent to 18.75 percent and cut about 80 percent of the acreage proposed by industry during environmental reviews ahead of proposed onshore lease auctions.

Status of Onshore Lease Sales

The Biden administration has yet to hold a single onshore lease sale. In April 2022, the Department of the Interior announced it would proceed with six oil and gas lease sales as part of a reformed federal leasing program that reduced land available by 80 percent and increased royalty rates for drillers. The lease sales were being held because of a June 2021 federal court ruling blocking Biden’s attempted “pause” on all new leasing, where the judge indicated that Congress had ordered the lease sales and Biden was violating the law.

The Biden administration was supposed to hold its first onshore oil and gas lease sales in Wyoming and several other states in June. It has postponed some of those sales, in fact, more than once. The date for three lease sales slated for New Mexico, Colorado and Wyoming is now supposed to take place at the end of June, a year after the Court order them to be held. The Bureau of Land Management (BLM) originally scheduled the New Mexico and Colorado sales for June 16 and the Wyoming sale for the week after. According to BLM, “The date for this sale has shifted slightly to complete the analyses required under the National Environmental Policy Act and allow time for protest resolution.” In addition, earlier this month, a separate oil and gas lease sale in Nevada scheduled for June 14 was delayed two weeks. Two other lease sales set for June 28 in Utah and Montana have so far not been pushed back.

Conclusion

Since taking office, Biden has canceled the Keystone XL pipeline, rolled back drilling in Alaska’s Arctic National Wildlife Refuge, canceled drilling in the Naval Petroleum Reserve—Alaska and pushed for green energy subsidies, while increasing fees on the oil and gas industry. His “pause” on leasing on federal lands was overturned by a federal judge, but as yet no onshore lease sales have been held in 18 months of the Biden administration. With one week remaining in June, squeezing in six oil and gas lease sales may be a difficult task, or maybe there will be further delays based on protests from environmentalists that have already delayed several lease sales. Delays and uncertainty about political risk are known to drive investment capital away from projects. Between the Administration’s mixed messages and their friends in the Green Movement’s repeated litigation, businesses are less likely to invest in federal land production of the oil and gas the Biden Administration argues it wishes to increase.

*This article was adapted from content originally published by the Institute for Energy Research.

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