Page 11 - NorthAmOil Week 36

NorthAmOil COMMENTARY NorthAmOil

Permian drillers scramble for

federal permits ahead of election

Permitting on federal land in the Permian Basin has spiked ahead of the US presidential

election, on concerns that Joe Biden would restrict new drilling on such land

US THE number of permits being sought for drill-
ing on federal land in the prolific Permian Basin
WHAT: – the US’ leading oil production region – has
The number of permits spiked in recent months. The rise has been attrib-
for drilling on federal uted to oil producers hedging against a potential
land in the Permian Basin win by Democratic nominee Joe Biden in the
is up by around 80% in upcoming US presidential election, due to take
the past three months. place in November. Biden has said that he would
seek to ban new oil and gas drilling permits on
WHY: federal land.
Producers are hedging Most US oil and gas production would
against a potential not be affected, as it comes from private land.
election win by Indeed, most of the land in the Permian Basin,
Democratic nominee Joe which spans Texas and New Mexico, is private.
Biden, who would seek However, around 65% of output from the New Nonetheless, concerns over a possible ban
to restrict new drilling on Mexico portion of the basin comes from federal on new federal permitting and other regulatory
federal land. acreage. changes has prompted drillers to apply for more
Biden currently leads US President Donald new permits. Enverus has suggested that this
WHAT NEXT: Trump in national polling, but this does not trend could continue up to the election.
Biden has made make victory certain, given how Trump’s victory Indeed, Enverus data show how a similar
assurances that he would in 2016 went against the expectations set out in phenomenon occurred in Colorado in 2018, as
not seek to ban the use of key polls. The volatile US political climate, com- voters considered a proposal that would have
hydraulic fracturing. bined with the ongoing coronavirus (COVID- severely restricted drilling in the state by requir-
19) pandemic and its impacts, makes the ing an increase in the distance between buildings
outcome of the election all the harder to predict. and new wells. In the second half of 2018, per-
mitting in the state rose 165% compared with the
Federal permits rise first half, according to Enverus. And at least nine
According to energy data firm Enverus, Per- producers are reported to have stockpiled more
mian producers had received 974 permits for than two years’ worth of permits.
new wells on federal land in the year to date as of Now this process appears to be playing out
August 24, compared with 1,068 for the whole of again, and leading to spikes in federal permitting
2019 and 265 for 2018. in New Mexico and Wyoming’s Powder River
And in the 90 days up to August 24, produc- Basin, among other regions. This week, Reuters
ers in the Permian are reported to have received cited a Tudor, Pickering, Holt & Co. analyst, Jake
404 permits, compared with 225 in the same Roberts, as saying most producers had “a runway
period of 2019 and 11 during that in 2018. of 12 to 18 months” in permits in the Permian
Some of the earlier growth, from 2018 to 2019, and Powder River basins.
can be attributed to drillers moving into different Shale drillers that have said they are stock-
areas of the Permian more broadly. But this year’s ing up on new permits include Devon Energy,
increase is notable, as it comes despite the down- EOG Resources, Cimarex Energy and Matador
turn in oil prices in March and the resultant col- Resources. For example, Devon has stockpiled
lapse of new shale drilling. Active US rig counts more than 550 federal permits in both New Mex-
have fallen to a series of new record lows in recent ico and Wyoming, which the company’s CEO,
months, and only started showing slight weekly Dave Hager, has described as “proactively man-
increases in late August, though a growth trend aging risks”.
does not yet appear to have been established. In New Mexico, about 85% of well permits
Indeed, analysts do not expect a significant so far this year have been for drilling on federal
recovery in new drilling activity anytime soon. land, up from 60% in 2018 and 2019, according

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