Debunking the oil industry’s false claims on Biden’s leasing reform
Recent Interior Department forum featured misleading statements from lobbyists, executives
Shortly after taking office, President Biden ordered the Interior Department to temporarily pause new oil and gas leases on public lands while considering how to reform the century-old program that has long favored the industry at the expense of taxpayers, communities, and our climate. Following that order, the Interior Department recently held a public forum to hear from a broad range of stakeholders, including Native American tribes, community leaders, environmental justice organizations, and the oil and gas industry itself. At the forum, representatives of the oil and gas industry made several deceptive — and often outright false — claims, which they are likely to repeat during a hearing on the leasing pause in the Senate Energy & Natural Resources Committee on Tuesday, April 27. Faced with the potential for widely popular and long-awaited reform, it appears the industry is turning to its well worn misinformation playbook. Below is a brief look at several false and misleading claims offered by industry representatives, and the reality contradicting them.
False claim: Industry trade groups are credible sources of information concerning the economic impact of DOI’s oil and gas leasing pause.
Reality: The Western Energy Alliance (WEA) and American Petroleum Institute (API) — the oil and gas industry’s most outspoken trade groups — are using discredited studies and outright lies in a blatant effort to undermine the leasing pause and block widely-supported, common-sense reforms to the federal leasing program.
First, WEA and API continue to cite grossly inflated economic data from a WEA-supported study that was prepared by an industry-aligned analyst.
- This analyst, who, at the request of WEA, “change[d] his methodology to count more possible economic impacts” from the leasing pause, may have “exaggerated” those “impacts by 70% to 85%.”
- In reality, the economic impacts of the leasing pause are far more modest than the figures that WEA and API are cavalierly throwing around, as DOI has continued to process and issue previously-sold leases and drilling permits “largely in line with 2020 levels…”
- Rig counts — a widely-accepted measure of the industry’s health — are also trending upward. In Colorado, New Mexico, Utah, and Wyoming, rig counts are now higher or on-par with the counts that immediately preceded the pause on Jan. 27.
Second, WEA and API continue to untruthfully cast the pause as a “ban” on leasing.
- Yet, the pause is just that — a temporary time-out on selling new oil and gas leases so that DOI can — for the first time in several decades — evaluate the leasing program and identify much-needed reforms.
- Further, as noted above, DOI has continued to process and issue previously-sold leases and drilling permits.
- Finally, oil and gas companies passed on 20 million acres of public lands leases that were offered during the Trump administration, which further undermines WEA and API’s claim that its members will somehow suffer grave economic harm unless the pause is lifted.
False claim: Orphaned oil wells are primarily a “state and local issue” because there are “only 296 identified orphaned wells” on federal lands
Reality: Orphaned wells — wells that have been abandoned by companies that have since gone bankrupt, leaving taxpayers to foot the bill for cleaning them up — are a major problem across the United States, including on national public lands.
Yet, at the forum and in the days since, industry has repeated the false claim that there are “only 296 identified orphaned wells” on federal lands. In reality, BLM does not know how many orphaned wells are actually on federal lands because, according to GAO, the agency does not “systematically and comprehensively” track orphaned wells. Thus, there are certainly more than 296 orphaned wells on federal lands, given that there are more than 3 million “abandoned” wells nationwide.
- A recent report from the National Wildlife Federation and Public Land Solutions hints at the real scope of the orphaned well problem on federal lands. According to this report, there are 8,050 idle federal wells across Colorado, Montana, New Mexico, Utah, and Wyoming that are either orphaned or at risk of being orphaned.
And given the major increase in oil and gas company bankruptcies in recent years, this number will likely continue to grow much higher as companies abandon wells without reclaiming them. Forty-six companies filed for bankruptcy in 2020 alone.
With this claim, the industry is trying to deflect blame about the growing crisis of emissions from orphaned and abandoned wells, which release the same amount of air pollution as 1.5 million cars, pollutes groundwater, leaks methane and toxic gases, and endangers wildlife — all to avoid being held responsible for reclaiming these wells.
Further, the costs to reclaim wells on federal lands could exceed $6 billion — yet, BLM has collected just $204 million in reclamation bonds from industry. It’s highly unlikely that state and local governments will be willing or able to step in and pay for clean-up costs on federal lands when inadequately bonded companies go bankrupt. Thus, the orphaned well problem is very much a federal problem that requires solutions and prompt action from the federal government.
Misleading claim: Industry is not sitting on unused permits or an abundance of leases
Reality: In the waning months of the Trump administration, the oil and gas industry stockpiled enough leases and permits to continue drilling on public lands for years.
Furthermore, the Center for Western Priorities found that the oil industry regularly fails to use the leases and permits it already has, foregoing development on more than 20 million acres of approved onshore federal leases in the West between 2011 and 2020. More than 8,400 approved onshore drilling permits (APDs) between 2016 and 2020 — 54% of all APDs approved during those five years — either expired without being used or are currently sitting unused.
- Of the 20 million acres of forfeited leases, 12.1 million acres were “terminated,” which typically happens when companies simply stop paying the rent they owe to American taxpayers.
Oil and gas CEOs are even admitting that they are stockpiling permits and leases. For example, David Hager, executive chairman of Devon Energy, said that his company has enough permits on hand to keep drilling for another four years.
And in their annual reports — where companies are required to disclose business risks to shareholders and investors — several large oil and gas companies did not even list the leasing pause as a major risk to their bottom lines. Top producers Chevron and ExxonMobil were among those that did not make any mention of President Biden’s executive order on climate change or the leasing pause. And other major producers downplayed the impact of the pause on their operations:
- Marathon Oil: “We do not believe that the new executive and temporary orders currently in effect will have a material adverse impact on our business.”
- ConocoPhillips: “If this temporary moratorium were to be extended indefinitely, we believe we can mitigate the impact for a considerable period of time with our current permits and adjusting our development plans across our diverse acreage position.”
When leases sit idle, it becomes that much harder for BLM to manage public lands for other important uses like recreation and conservation, and the leases provide next-to-nothing for federal taxpayers.
Industry is trying to assert that the current number of unused permits they are sitting on is “normal” and not indicative of any kind of inactivity, but between October 1, 2020, and January 31, 2021, oil and gas operators received over 2,000 approved drilling permits — at least 77 percent more than they had in the first quarter of any fiscal year within the past ten years. These CEOs are arguing that hoarding 13.9 million idle acres and over 8,400 unused permits is just part of their business model. Well, any business model that relies on leasing as much public land as possible with only the hope that some might help their bottom-line — all while taxpayers and other public lands uses suffer — is inherently flawed. Industry is owning up to these figures as a way of downplaying them.
Misleading narrative: Oil and gas development should trump other uses of public lands
Reality: The Bureau of Land Management has a mandate to manage our public lands for multiple uses, including recreation, conservation, and energy development. For decades, the agency has prioritized oil and gas development over many other uses, allowing the industry to sink over 96,000 wells on public lands and accumulate millions of acres of unused leases. However, if the oil industry is not able to fully develop the abundant leases they already have, it is not the government’s responsibility to prioritize their bottom line over other uses of public lands.
Outdoor recreation — which is harmed by lands being locked up by oil and gas development — is a $788 billion economy that supports 5.2 million jobs.
Because of the Trump administration’s attempts to make energy development the dominant use of our public lands, practices like speculative and noncompetitive leasing exploded, wasting limited government resources while locking away lands with other uses and doing little to help further development.
For too long, the oil and gas industry has taken advantage of sweetheart deals, leasing our public lands for pennies on the dollars, depriving local, state, and federal governments much needed revenue, while shoveling cleanup costs onto taxpayers. It is time for the Biden administration to see through the oil industry’s well-worn misinformation and dramatically reform the broken system that governs drilling on our public lands.
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