Page 5 - NorthAmOil Week 16 2022

NorthAmOil COMMENTARY NorthAmOil

offshore lease sales by the Biden administration Strategic Petroleum Reserve (SPR) and while
for the time being. In late March, economic pro- the impact of lease sales would not be seen in
jections included in the administration’s budget the shorter term, the industry has been vocal in
proposal suggested that it does not anticipate criticising Biden for not doing enough to help
selling any more offshore drilling rights until support it.
October 2023. And a new five-year plan for This comes at the same time that the Biden
selling offshore leases is reported not to be on administration remains under fire from envi-
track to be in place by June 30, when the current ronmental groups for allowing lease sales
programme expires. to take place at all. The DoI has said that the
The DoI told Bloomberg in late March that newly announced lease sales were “significantly
it was “actively developing” its five-year off- reformed” in an effort to address the deficiencies
shore leasing programme. It also noted that of identified in the federal leasing programmes.
the more than 11mn acres (44,515 square km) The acreage on offer represents an 80% reduc-
of federal waters currently under lease, almost tion on acreage originally assessed for the lease
76% were unused and non-producing – likely sales across Alabama, Colorado, Montana,
seeking to highlight that producers can do more Nevada, New Mexico, North Dakota, Okla- The acreage on
to boost drilling on existing leases. Nonetheless, homa, Utah and Wyoming.
the Biden administration is likely to come under The BLM had initially assessed 646 parcels offer represents
fire from the industry for calling on US produc- on roughly 733,000 acres (2,966 square km) an 80%
ers to ramp up output while not helping to facil- that had been nominated for leasing by oil and
itate this through new offshore leasing and other gas companies. The 173 parcels that made it reduction on
measures. through the assessment will also be subject to
a new, higher royalty rate of 18.75%, up from acreage originally
Onshore leasing 12.5% previously, which the DoI said would
The way things have played out offshore does “ensure fair return for the American taxpayer assessed for the
not bode particularly well for onshore lease sales and on par with rates charged by states and pri- lease sales.
now that they are restarting. It seems highly vate landowners”.
likely that environmental groups will seek to The lease sales are due to be held in June
challenge the results of onshore lease sales too, across eight states. Of those states initially
and if such results are voided the US government assessed, Alabama is the only one not to move
may not be in a hurry to address it. forward with a lease sale, with the sole parcel
On the other hand, Biden will come under there not having met the BLM’s criteria.
increasingly more pressure to be seen to be tak- How much interest the lease sale will generate
ing action on oil and gasoline prices as Novem- remains to be seen – higher prices could spur
ber’s midterm elections approach. Oil prices additional interest, but at the same time uncer-
currently show no signs of declining, despite tainty over the future US position on federal
the US’ releases of crude stockpiles from the leasing could act as a deterrent.™

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