The oil industry is doing fine with a pause on oil leasing — just ask their CEOs
In the weeks since President Biden announced a temporary pause on oil and gas leasing on national public lands, groups that represent the oil industry, like the Western Energy Alliance and American Petroleum Institute, have gone full Chicken Little, claiming the pause will cost thousands of jobs and billions of dollars in revenue to states. API is spending more than $1 million on an ad campaign that even suggests school buses will vanish into thin air as a result of the leasing pause.
There’s just one problem with these dire predictions — oil executives themselves say they’re nonsense.
In February, the head of oil giant ConocoPhillips, one of the largest producers on federal lands, addressed the pause directly during an earnings call with investors, even speculating about the potential impact on the company if the Biden administration went even further and ordered a moratorium on new drilling permits, not just leasing public land.
The message from chairman and CEO Ryan Lance was unequivocal: “ConocoPhillips has the flexibility, the diversity and the depth of low cost of supply and low-GHG resource to manage through this issue without materially impacting our plans.”
It’s difficult to square that definitive statement with the campaign of fear, uncertainty, and doubt that the oil industry has unleashed. On a call with reporters after the leasing pause was announced, API CEO Mike Somers warned of “hundreds of thousands of lost jobs and billions in government revenue at risk.”
Similarly, Kathleen Sgamma, the head of the Western Energy Alliance, told Fox News that merely pausing leasing “will kill 58,700 jobs in eight states in the West.” If those claims were even remotely true, then WEA’s member companies would have a legal and financial obligation to tell investors the same thing — and they’re not.
Billy Helms, the Chief Operating Officer of EOG Resources, told an investor conference that the company already has at least four years’ worth of drilling permits on national public lands. “When it comes to access to federal lands, that’s one of the things we’re not really worried about in our business,” Helms said. He added that EOG has “a lot of potential outside of federal land, too.”
It’s a similar story at Devon Energy, the largest producer on federal land in the lower 48 states. “We have always been very confident that we will continue to develop and drill on federal acreage,” Executive Chairman David Hager told Reuters. “It’s embedded into the rights we have in the leases and we’re doing it the right way,” adding that Devon also had at least four years’ worth of existing drilling permits on federal land.
Indeed, the final days of the Trump administration turned into a mad rush to give the industry even more. The Associated Press found that during a three month period that included the election, the Trump administration approved nearly 1,400 drilling applications, the highest during Trump’s four-year term.
In 2020, despite the global pandemic that at one point sent oil prices plunging below zero, the administration issued more than 4,700 new drilling permits — a volume not seen since the price of oil was above $100 a barrel.
So if oil companies aren’t actually threatened by the temporary pause on leasing, why do they want the American people to think a pause is so dire? It’s likely because they know their gravy train is running out of track.
The leasing pause, coupled with falling demand, gives the Biden administration time to evaluate the entire oil and gas leasing program, which has been largely untouched since Congress passed the Mineral Leasing Act of 1920. The pause gives Congress time to bring the royalty rates that oil companies pay in line with market rates, ending a subsidy that has cost taxpayers billions of dollars over the last century. It creates a window to finally require oil and gas companies post bonds sufficient to cover the costs of cleaning up oil wells when drillers go bust.
Perhaps most significantly, the pause gives companies like GM the confidence to announce the end of internal combustion engines entirely — a market-driven move that truly does pose an existential threat to oil and gas companies.
That inevitable change is what looms largest over the industry. Numerous oil companies are mired in a debt crisis of their own creation, having over-leveraged themselves before the pandemic hit. ExxonMobil is laying off 14,000 employees, and college graduates are realizing that they prepared for jobs that may never exist again.
It’s undeniable that the world is facing a climate crisis and that the only way out is to drastically reduce carbon emissions. Taking the time to fully account for the damage caused by oil and gas drilling on public lands is a vital first step in getting to net zero. During this transition, America will need to help oil-dependent communities and workers find their place in the rapidly growing renewable energy industry. But in the short term, the oil industry’s crocodile tears over public lands shouldn’t fool anyone. Take their own executives’ word for it.
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