Erik Milito, President, NOIA

A Public Policy Energy Blunder

How the New Federal Offshore Oil and Gas Leasing Imperils U.S. Economic, Energy, and National Security

By Erik Milito, President, National Ocean Industries Association (NOIA)

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The recent release of the U.S. Department of the Interior's new federal offshore oil and gas leasing program should be a moment of opportunity and progress for our nation. Mandated by law and long overdue, it was a chance to bolster our energy security, create jobs, and support economic growth. Instead, it's shaping up to be a failure for the country.

Energy inflation is rampant and the possibility of a national recession looms. The decision to severely limit leasing opportunities in our offshore areas could not have come at a worse time. The constraints imposed on this critical strategic energy asset ignore our energy realities, hindering American energy production when the world's demand for energy continues to reach record highs.

The Gulf of Mexico is a region known for its prolific oil reserves, highly skilled workforce, and world-class infrastructure. However, this new leasing program slashes the number of oil and gas lease sales in the Gulf, offering the fewest in history, a mere three, scheduled in 2025, 2027, and 2029. This is well below the typical 11-20 range of lease sales in prior programs.

Just as concerning is the decision to postpone environmental analyses for individual lease sales. Traditionally, these analyses are conducted concurrently with the development of the broader leasing program, ensuring uninterrupted lease sales. This fundamental approach was consistently followed, regardless of the party in power, as it supported uninterrupted leasing activities.

However, the Biden Administration has decided to deviate from this well-established norm. By delaying the lease sale-specific environmental analyses until after the leasing schedule is finalized, the Administration sets the stage for even further delays, exacerbating the drastic impacts from the regressive leasing program and potentially driving investment and energy production away from U.S. waters to despotic and autocratic regimes around the world.

While the Department of the Interior argues that this program aligns with the Inflation Reduction Act (IRA) and supports offshore wind leasing, the two-year gap between lease sales not only disrupts domestic oil and gas development, it also jeopardizes timely and predictable offshore wind leasing.

The repercussions of this failed leasing program are extensive. Discouraging investment in U.S. offshore energy production will burden families with escalating fuel costs, erase good-paying jobs vital to Gulf Coast communities, and diminish our geopolitical advantage in energy production – which is crucial at a time of historic geopolitical turmoil around the world.

In these times of rising inflation and global instability, we should be leveraging our strategic advantage in the U.S. Gulf of Mexico. However, this leasing program does the opposite — it threatens the region's growth, along with hundreds of thousands of jobs, billions of dollars in investments, and substantial government revenue.

A growing body of research is calling for more oil and gas exploration and development to keep up with growing demand. Currently, global oil consumption is approximately 100 million barrels per day. Various scenarios forecast global oil demand through 2050 and beyond, and nearly all of them predict substantial oil production will be necessary through at least 2050. Research from energy analysts continue to predict massive investments in oil producing projects are needed to keep pace with growing demand. Some suggest that capital expenditures of at least $3 trillion will be required to replenish declining production from currently producing assets around the world to meet expected global demand in 2050.

To address these issues and harness the potential of our energy resources, we should companies to invest here by allowing opportunities for leasing through a plentiful and predictable schedule of lease sales. This approach not only supports our energy security but also strengthens our economic prospects and will actually serve to reduce emissions more effectively – the research continues to validate the Gulf of Mexico’s status as an oil producing region with among the lowest carbon intensity emissions in the world.

It is also essential to consider the swiftly emerging offshore energy sectors, such as offshore wind and carbon sequestration. Many of the companies integral to the offshore oil and gas industry will play a crucial role in these emerging U.S. sectors. These areas all involve marine construction, and the engineering and construction capacity of businesses in the Gulf of Mexico's oil and gas sector will be instrumental for the build-out of these projects. The continued success of the companies in the offshore oil and gas supply chain will be pivotal to the future prospects for new American offshore wind farms and Gulf of Mexico carbon sequestration projects.

This new offshore oil and gas leasing program, as it stands, is not just a missed opportunity – it's a step backward. It is a regressive policy that threatens our energy future and weakens our position on the global stage. We must work together on a course correction to ensure that our offshore energy resources continue to be a source of strength for our nation.

Erik Milito

About the Author:

Erik Milito is president of the National Ocean Industries Association (NOIA), a national trade association representing the full spectrum of offshore energy companies.

September - October 2023