“With the federal government now practically giving away land for oil and gas drilling, oil-producing states that levy taxes on leasing and drilling that happens on state and private lands may stand to lose important revenue streams at a time when public budgets are already under serious stress. That’s led even conservative-leaning taxpayer advocacy groups to join environmentalists in opposing….”
The Bureau of Land Management is rushing to auction off sites ahead of a potential Biden presidency.
The New Republic: Kate Aronoff
On Tuesday, the Bureau of Land Management auctioned off oil and gas leases to 11 parcels of land totaling around 15,000 acres in Nevada. It’s the latest event in a troubling trend in the Trump administration: Much as the Environmental Protection Agency has been in a mad dash to peel back environmental regulations in the lead-up to November’s election, the Department of the Interior now seems to be embarking on a fire sale of public lands to oil and gas drillers in advance of a potential Democratic administration.
Cheap leases are some of the many subsidies the federal government furnishes to fossil fuel producers. The Trump administration in recent months has been especially eager to accelerate drilling by offering up federal land to fossil fuel companies at a bargain. But like much of the so-called relief Republicans have offered the struggling fossil fuel industry, this basically comes down to making drilling easier—and drilling more won’t help the oil industry right now, given the way supply is outstripping demand. After a temporary rally through mid and late summer, oil prices dropped sharply on Tuesday owing to weak demand and Saudi Arabia’s ensuing decision to slash prices. Brent crude dipped to less than $40 per barrel for the first time since June, well below the price needed for most unconventional drilling to be profitable. Six more lease sales are planned for the rest of September, spanning several Western states and fuel reserves for which there isn’t currently much of an appetite, going by the low prices at Tuesday’s auction.
The lease sales are clearly bad for the planet, local ecosystems, and also Native nations who often aren’t adequately consulted on such projects. For fossil fuel executives, they’re a risky bet. Some experts predict that, even with an economic recovery in the coming months, oil demand will soon start to drop off permanently. With bankruptcies among smaller firms mounting, big multinational fossil fuel producers have been selling off and writing down their investments in North America, where the high-cost, unconventional drilling that fueled the shale boom was failing to turn a profit well before the country’s first reported cases of Covid-19. A sale of New Mexico leases late last month—when oil prices were higher—drew bids averaging just $169 per acre, compared to the $1,386 per acre the state brought in through a sale before the pandemic took hold in February. Seven of the 11 parcels leased at Tuesday’s auction went for the minimum bid of $2 an acre, while the remaining four sold for $10 an acre, according to results posted to EnergyNet.
This is not a temporary problem, nor is it confined to lease sales. While the state-owned producers in OPEC can turn taps on and off in response to changing economic and political conditions, the United States has exercised no such authority since the 1970s, when the Texas Railroad Commission worked with major oil companies to control world oil prices. As a result, it’s mostly lost its ability to shape global energy markets. With the U.S. now unwilling to curb domestic production—indeed, with a White House hell-bent on boosting it—the country’s producers are now effectively at the mercy of other big fossil fuel exporters, namely Saudi Arabia.
A Biden administration wouldn’t necessarily reverse these trends. Though Republicans have spent the last few months fearmongering that a Biden administration would abolish fossil fuels, his actual plan adopts a pretty light touch when it comes to polluting industries. On the campaign trail, Biden himself has reiterated in recent weeks that he wouldn’t put an end to fracking, pledging instead to halt only new drilling on federal lands. That means that the leases the Trump administration intends to sell off before November could be fully developed even if the White House changes hands.