Drilling on federal land is oil’s gas stove moment
A month in, the biggest U.S. energy story of 2023 concerns something that accounts for an infinitesimal share of actual demand: gas stoves.
Fresh from going to the barricades for freedom flames, House Republicans have seemingly stuck to the margins in their next campaign. They just passed a new bill targeting the Strategic Petroleum Reserve, from which President Joe Biden drew heavily last year to counter the oil-price spike sparked by Russia’s invasion of Ukraine. The legislation would seek to curb the president’s ability to release SPR barrels and tie any release to a corresponding increase in the percentage of federal areas opened up for drilling. It is the latter that, as with those gas stoves, thrusts a relatively minor player into the spotlight.
Enersection, an energyfocused data visualization firm based in Houston, has dissected the numbers extensively for energy production on federal lands and waters. The big takeaways are:
As with oil and gas production in general, federalarea output is close to the peak observed just before the pandemic;
Federal areas account for only about one-sixth of U.S. production.
Within those data, onshore oil production is the most pertinent metric because that is where the shale basins are and, therefore, where producers are likely to react quickest to any incentive to drill. In data going back to 2003, output actually crossed above 1 million barrels a day for the first time during Biden’s tenure. And while it has declined somewhat since last summer, that coincides with a decline in oil prices — no conspiracy needed.
Moreover, as Enersection laid out in an analysis published in September, roughly seven out of every 10 barrels of oil produced onshore on federal lands comes from just two counties in the entire country: Lea and Eddy in New Mexico. And between 2010 and 2020, while oil and gas companies leased about 15 million new federal acres, they allowed leases on 34 million to expire. In short, if your concern is raising U.S. oil and gas production further, the action is overwhelmingly on private and state lands, not federal acreage.
Even leaving that aside, linking releases from the SPR via some mathematical formula to leasing more federal land, as the House Republicans’ bill would mandate, doesn’t make sense if your actual concern is replenishing barrels quickly. If Congress is really concerned with refilling the SPR, codifying the repurchasing parameters put forward by the Department of Energy last year would be a useful outcome. This would send a clearer signal to producers about the SPR’s role as a source of incremental demand when being refilled, in part by limiting the White House’s scope to move the goal posts.
The energy transition, by its nature, does act as a brake on investment in oil and gas, particularly longer-dated projects, and is gathering pace regardless of Biden’s utterances. Where the administration has real power to facilitate domestic production, such as leasing rounds and permits, it should do so responsibly, especially in light of Russia’s energy war.