President Obama is trying to preserve his legacy by removing areas of federal lands from oil and gas development. He has modified his offshore lease plan for fiscal years 2017 to 2022 to remove areas offshore in the Atlantic and the Arctic and he has cancelled lease sales in Montana and Colorado. Further, he has “permanently” removed large areas in the Arctic and along the Atlantic Coast from oil and gas development. Despite these moves, a recent lease sale in Alaska achieved very large bids and a survey of Alaskans showed keen interest in oil and gas development.
Cancellation of Lease Sales in Montana and Colorado
Last month, the Interior Department canceled leases for oil and gas drilling in Montana and settled with Devon Energy, who owned them, because the lands are considered sacred by the Blackfoot Tribes of the United States and Canada. The leases covered parts of the Badger-Two Medicine area of the Lewis and Clark National Forest in northwest Montana–an area of 130,000 acres surrounded by Glacier National Park, the Bob Marshall Wilderness and the Blackfeet Indian reservation.[i]
Under the terms of the cancellation, Devon Energy will be refunded for all bids and other payments it made, totaling $206,058. Half of the payment will come from the federal government out of a Treasury account that receives royalties from onshore oil and gas development and the other half will come from Montana’s royalty payments. Devon Energy does not need to pay for reclamation because the land was not developed for drilling.
In March, the Interior Department cancelled a 6,200 acre lease held by Solonex LLC, a Louisiana company that sued for permission to drill for gas on the leases that date back to 1982.[ii] The Interior department argued that the lease was issued in violation of the National Environmental Policy Act and the National Historical Preservation Act.
The Interior Department issued 47 oil and gas drilling leases in the Badger-Two Medicine area during the Reagan Administration. Later, nearly two thirds of the original leaseholders relinquished their leases in exchange for tax incentives established by Congress. Only 17 leases remained as of early this year, of which Devon Energy owned 15 on almost 23,000 acres issued in the early 1980s. Two leases remain.
Similar to the cancelled leases with Devon Energy, the Interior Department cancelled 25 oil and natural gas leases and put new conditions on 40 other leases at the Thompson Divide section of the White River National Forest in Colorado—a 220,000 acre tract. The leases were cancelled and conditions were changed due to a technicality in the environmental review, but one that is not a substantial issue.[iii] The region is not a pristine wilderness; it sits astride the energy-rich “Overthrust Belt.” Alongside the cancelled leases are other leases that are producing oil and natural gas.[iv] The Bureau of Land Management granted 65 leases in the area in 2005.[v]
The leases are located in the Mancos Shale in Colorado, which contains oil and natural gas that is being drilled using hydraulic fracturing–a drilling method that injects water and sand into shale deposits to release the oil and gas trapped in its seams. The Mancos Shale has the second-largest oil and gas potential that the U. S. Geological Survey has ever conducted.[vi] It contains an estimated mean of 66 trillion cubic feet of shale gas, 74 million barrels of shale oil and 45 million barrels of gas liquids.
Withdrawal of Atlantic and Arctic in Offshore Lease Plan
The Department of Interior modified its proposed offshore lease plan for oil and natural gas development for 2017 to 2022 and removed the Atlantic and the Arctic from the plan. In March, Obama’s Interior Department rescinded drilling rights in the Atlantic Ocean, where a small set of drilling rights sales had been offered off the coast between Virginia and Georgia.[vii] In November, the Obama Administration removed the planned sale of oil and gas drilling rights in the Chukchi and Beaufort seas north of Alaska.
The U.S. Arctic is estimated to hold 27 billion barrels of oil and 132 trillion cubic feet of natural gas.[viii] Allowing drilling in the Arctic would help to provide oil for the Trans-Alaska Pipeline System, whose flow is currently at dangerously low levels for keeping it operational.
The five year drilling plan for 2017 to 2022 now only has 11 proposed lease sales: one in Alaska’s Cook Inlet southwest of Anchorage and ten lease sales in the Gulf of Mexico–mostly off the coasts of Mississippi, Louisiana, Texas and Alabama.[ix]
Undoing the drilling plan will take time if a Trump Administration chooses to do so. It is not clear if the Congressional Review Act could be used to overturn the drilling plan. Under the Congressional Review Act (CRA), a “rule” has a more expansive definition than under the Administrative Procedures Act (the act that controls how the federal government makes regulations). A difficult consideration is that if Congress rejects a rule under the CRA, then the agency cannot re-propose something “substantially the same.” Would a leasing program that contains all of these lease sales and more be “substantially the same?” That isn’t clear. To be on the safe side, the Trump administration will likely produce a new Offshore Leasing Plan, but it will take a couple years to go through the reviews that are required.
Obama Blocks Bering Sea Area from Drilling
On December 9, 2016, President Obama issued Executive Order 13689 that creates the Northern Bering Sea Climate Resilience area, spanning from the Kuskokwim Bay to northeast of Shishmaref, to the maritime boundary with Russia.[x] (See map below.) The order withdraws 40,300 square miles from oil and natural gas leasing in this area using the Outer Continental Shelf Lands Act. This order was supposedly to protect the environment for the Alaska Native tribes that live there. However, the Chairman of the House Natural Resources Committee, Rob Bishop, issued the following statement:
“This administration has obeyed every directive from environmentalists to starve the Trans-Alaska Pipeline System and block responsible development. Today’s action will make the Bering Strait a choke point for any vessel seeking to reach Alaska Natives on the North Slope who want to see economic development on their lands. Alaskans want a brighter future with growing jobs, rising incomes and a healthy economy. Unfortunately, that doesn’t fit with President Obama’s dubious legacy.”[xi]
Obama “Permanently” Bans Drilling in Atlantic and Arctic
President Obama has “permanently” banned future oil and gas drilling in parts of the Arctic and Atlantic oceans, using a provision in the Outer Continental Shelf Lands Act (OCSLA), similar to the withdrawal of the portion of the Bering Sea noted above. Mr. Obama banned oil and gas drilling from Virginia to Maine on the Atlantic and along much of Alaska’s coast—an action not undertaken by any previous President in either the length or scope of the ban. He has banned drilling in about 98 percent of federally owned Arctic waters, or about 115 million acres, and in 3.8 million acres stretching from Norfolk, Virginia, to the Canadian border. The declaration’s fate may be decided by the federal courts.[xii]
By using Section 12(a) of the OCSLA, Obama would make it difficult for President-elect Trump to open the area back up to drilling because that law allows presidents only to withdraw waters; it does not include language allowing presidents to reverse such withdrawals. Congress could pass legislation to open the area back up to drilling activity. But it is uncertain whether President-Elect Trump could undo the withdrawals unilaterally.[xiii]
The withdrawal is not expected to affect drilling or production under existing leases, including 42 parcels in the Beaufort Sea. The action also does not affect waters under state jurisdiction, including part of the Beaufort Sea where a potential 6 billion barrel discovery was made.[xiv]
As with the Bering Sea move, President Obama is taking away jobs and prosperity from Alaskans. The Arctic Energy Center released a poll conducted by FTI Consulting of 511 Alaskans that showed 76 percent support offshore oil and gas resource development. (The poll has a margin of error of 4.4 percentage points.)
Alaska Lease Sales Show Overwhelming Interest
Recently, in Alaska, exploration companies bid heavily in state and federal lease sales that were the largest in years. High bids in state lease sales totaled $17.8 million on tracts covering 633,000 acres on the North Slope and in the coastal Beaufort Sea. In the federal lease sale, the Bureau of Land Management received bids totaling $54 million–the largest annual lease sale since 2004. In the National Petroleum Reserve-Alaska, the Bureau of Land Management received 92 bids on 67 tracts, generating $18.8 million for 614,000 acres. The state receives half the revenue from the sale ($9.4 million). This 2016 lease sale was in contrast to the 2015 lease sale, where the Bureau of land Management received just six bids worth $789,000.[xv]
A recent lease sale in Alaska showed a high level of interest with federal lease sales more than 68 times greater than the previous year. Much of the interest may well be that President Elect Trump is very much in favor of oil, natural gas, and coal and is expected to open federal lands to their development. However, President Obama is not sitting idle and is continuing his war against fossil fuels by cancelling oil and gas lease sales in Montana and Colorado and by withdrawing the Atlantic and the Arctic from his five year offshore lease plan for 2017 to 2022. Even worse, he has evoked a 1953 law removing parts of the Bering Sea, the Arctic and the Atlantic Ocean from oil and gas drilling indefinitely.
[i] The Washington Post, Obama administration cancels oil and gas leases on Blackfeet tribe’s sacred grounds, November 16, 2016, https://www.washingtonpost.com/news/energy-environment/wp/2016/11/16/obama-administration-reaches-deal-to-cancel-oil-leases-on-lands-tied-to-tribe/?postshare=8211479384972306&tid=ss_tw&utm_term=.b0966552aa18
[ii] Fox News, US cancels energy leases in Montana area sacred to Blackfeet, November 17, 2016, http://www.foxnews.com/us/2016/11/17/us-cancels-energy-leases-in-montana-area-sacred-to-blackfeet.html?refresh=true
[iii] Platts, Obama administration cancels 25 Colorado oil, gas leases, November 17, 2016, http://www.platts.com/latest-news/oil/washington/obama-administration-cancels-25-colorado-oil-27712187
[iv] Washington Examiner, Obama’s War on Energy from Federal Lands, December 1, 2016, http://www.washingtonexaminer.com/obamas-war-on-energy-from-federal-lands/article/2608608
[v] CBS Denver, 25 Oil and Gas Leases Canceled in Western Colorado, November 17, 2016, http://denver.cbslocal.com/2016/11/17/25-oil-gas-leases-canceled-in-western-colorado/
[vi] Washington Examiner, GOP opposes Obama’s 11th-hour ploy to shut down fracking, November 17, 2016, http://www.washingtonexaminer.com/gop-opposes-obamas-11th-hour-ploy-to-shut-down-fracking/article/2607699
[vii] The Hill, Obama rescinds Arctic offshore drilling proposal, November 18, 2016, http://thehill.com/policy/energy-environment/306764-obama-takes-new-arctic-offshore-drilling-off-the-table
[viii] Bloomberg, Obama’s Offshore Oil Plan Forces Drillers to Focus on Gulf, November 18, 2016, https://www.bloomberg.com/news/articles/2016-11-18/obama-s-offshore-oil-plan-forces-drillers-to-focus-on-u-s-gulf
[ix] Fox News, Obama blocks new oil, gas drilling in Arctic Ocean, November 18, 2016, http://www.foxnews.com/politics/2016/11/18/obama-blocks-new-oil-gas-drilling-in-arctic-ocean.html?refresh=true
[x] White House, Executive Order — Northern Bering Sea Climate Resilience, December 9, 2016, https://www.whitehouse.gov/the-press-office/2016/12/09/executive-order-northern-bering-sea-climate-resilience
[xi] House Committee on Natural Resources, Press Release, December 9, 2016, http://naturalresources.house.gov/newsroom/documentsingle.aspx?DocumentID=401433
[xii] New York Times, Obama Bans Drilling in Parts of the Atlantic and the Arctic, December 20, 2016, http://www.nytimes.com/2016/12/20/us/obama-drilling-ban-arctic-atlantic.html?emc=edit_na_20161220&nlid=63692790&ref=cta&_r=0
[xiii] Greenwire, Obama likely to ban Arctic, Atlantic oil activity, December 20, 2016, http://www.eenews.net/greenwire/2016/12/20/stories/1060047484
[xiv] Bloomberg, Obama Said to Use 1953 Law to Restrict Offshore Drilling, December 19, 2016, https://www.bloomberg.com/politics/articles/2016-12-19/obama-said-to-use-1953-law-to-block-drilling-in-arctic-atlantic
[xv] ‘Surprising’ Alaska oil-lease sale draws big bids, December 14, 2016, https://www.adn.com/business-economy/energy/2016/12/14/surprising-alaska-oil-lease-sale-draws-big-bids/
The post Obama Cancels Lease Sales and Withdraws Federal Lands from Oil and Gas Development appeared first on IER.