What Biden’s Pause On Oil And Gas Leases On Federal Lands Means For Colorado

January 27, 2021
OIL-PUMP-JACKS-SNOW-ERIEOIL-PUMP-JACKS-SNOW-ERIEHart Van Denburg/CPR News
Oil pump jacks in the snow near Erie, Tuesday, Jan. 26, 2021

President Joe Biden is pressing the pause button on oil and gas leases on federal land. 

The executive action signed Wednesday is one in a series of orders to accelerate federal efforts to combat climate change. It directs the Secretary of Interior to “pause” new leases while the administration reviews the program to allow drilling on public land, according to information released by the White House.

Other policies call for the preservation of 30 percent of the nation’s land and ocean by 2030 and a framework for a new Climate Conservation Corps. The order does not ban new leases on coal.

The move fulfills a campaign promise from President Biden. Besides marking a shift in the pro-industry policies of the Trump administration, it also signals a new focus on oil and gas production. Previous climate policies, like car efficiency standards, were aimed at the demand-side of the climate equation.

In remarks at Wednesday’s signing ceremony, Biden said he would not push for a federal ban on fracking — which President Trump falsely claimed Biden promised to stop during the presidential campaign.

Economic and environmental costs

The move divided the Colorado environment groups and the oil and gas industry.

Aaron Weiss, the executive director for the Center for Western Priorities, a public lands advocacy group, said a revamp of the federal leasing program is long overdue. 

“The oil and gas industry has spent the last 100 years, and especially the last four years of the Trump Administration, getting everything it wants from public lands at bargain prices,” Weiss said.

About a quarter of U.S. oil and an eighth of the nation’s natural gas is produced on federal lands. In Colorado, the Bureau of Land Management had leased 2.5 million acres to oil and gas companies through 2019, according to federal data. About 40 percent of that acreage is currently used to produce petroleum, which Weiss said shows companies still have plenty of land to drill for years to come.

Royalties and fees from those leases are a major source of government revenue. The program provided about $7.6 billion to federal, state, local and tribal governments in 2020, according to the Interior Department’s Office of Natural Resources Revenue. Colorado took in just over $57 million. 

Weiss said those numbers might sound big, but it’s not nearly enough to cover the cleanup and climate consequences of drilling on public lands. Companies pay a 12.5 percent royalty rate on federal leases, which Weiss said is far lower than what most westerns states charge to allow drilling on state land. Colorado assesses a 16.67 percent rate on state-owned leases

“The oil and gas industry needs to pay their fair share, and they are not today,” Weiss said.

The oil and gas industry decried Biden’s actions as an attack on rural communities that rely on federal drilling.

Kathleen Sgamma, president of the Western Energy Alliance, said the ban would hurt other industries and government functions funded by drilling on federal lands, including lodging and conservation programs. 

She cited a recent study done on behalf of the Wyoming Energy Authority that estimated hundreds of millions of dollars in investment and thousands of jobs in Colorado would be lost within a single year, with a brunt of that coming down on the Western Slope. The Western Energy Alliance paid to promote the study, she said, and other industry groups previously funded its author.

On Wednesday, the alliance said it would file a legal challenge to the order, citing federal law that “eligible lands” are required to hold lease sales periodically.

“This administration has plans to further regulate oil and natural gas development, both on and off federal lands,” Sgamma said. “But an outright ban on leasing and drilling on federal lands is not within the authority of the president, and we will definitely be in court to challenge that.”

Shifting demand

Some public land experts say industry arguments don’t hold much weight, and that the executive order is unlikely to have much of an effect on a commodity that has trended downward in recent years.

There are still millions of acres of public land that have been leased but not developed, including more than a million in Colorado, said Mark Squillace, a law professor at University of Colorado Boulder.

Squillace, who previously worked for the Interior Department, said lease rates have dropped dramatically in recent years along with the price of oil. As the nation moves away from using oil, particularly in transportation, he said it’s unlikely that demand and production will return to its boom days, he said. 

“It's a halt to new leasing at a time when there really isn't a whole lot of demand for oil and gas development,” he said.

Squillace said the Biden administration should focus on other options that would have a more significant effect on the climate, including taking back leases that have sat idle for years. 

The exact climate impact of Biden’s actions is not easy to pin down. Brian Prest, an economist at Resources for the Future, a nonpartisan think tank, wrote a study under peer review that models the impact of a permanent leasing ban that suggests the policy would significantly cut emissions from public lands. Prest’s research also suggests drilling on private lands and overseas would increase to fill the demand, offsetting much of the overall climate impact. 

“Production flows away from the regulated section, in this case public lands, towards places not covered by the policy,” he said. 

Biden’s climate action could speed up an ongoing shift from fossil fuels to electric power and renewable energy. The BlueGreen Alliance, an organization bridging labor unions and environmental organizations, released a report this week calling for stronger programs to support workers in the unstable oil and gas industry.

“If there were a massive downturn in the oil and gas arena, there would be multiple communities in Colorado and New Mexico who would be vulnerable to that economic shift,” said Chris Markuson, the director of Colorado and state economic transition policy for BlueGreen Alliance.