One week after his inauguration, President Biden issued Executive Order 14008, “Tackling the Climate Crisis at Home and Abroad” (the Order), a move consistent with the progressive environmental platform he championed during his campaign.[i] The Order lays out aggressive domestic policy mandates and reaffirms the Biden Administration’s commitment to leading the global effort to combat the climate crisis.[ii]
As part of the sweeping domestic policies set forth in the Order, President Biden directed the Secretary of Interior (the Secretary) to pause new oil and gas leases on public lands and offshore waters.[iii] The Order does not specify the length of the moratorium, but does prohibit the issuance of any new leases until the Secretary conducts a “comprehensive review” of the current oil and gas permitting requirements under law.[iv]
The moratorium is positioned as one piece of the broader effort by the Administration to manage public lands and waters in service of “robust climate action.”[v] To that end, the Order also directs the Secretary to identify ways to increase renewable energy production on public lands and to review all existing leasing, permitting, and royalty practices related to fossil fuel development and extraction.[vi] These directives followed in the wake of an initial 60-day freeze on granting rights of way, easements, or conveyances for projects that would “authorize ground disturbing activities.”[vii]
Reactions to the Order fell largely along ideological lines. Conservation advocates praised the decision as a way to reduce greenhouse gas emissions and conserve public lands,[viii] while some interest groups, like the Western Energy Alliance, have already mounted legal challenges.[ix]
In the short term, though, the moratorium is unlikely to significantly disturb the oil and gas industry. One reason is that developers stockpiled permits on federal lands in states like New Mexico and Wyoming in the final days of the Trump Administration. Developers submitted more than 3,000 drilling permit applications in a three-month period near the end of 2020 and officials approved almost 1,400 drilling applications during that time.[x]
The broader oil and gas industry may avoid negative effects from the moratorium, but any decision to tighten leasing and permitting regulations could ultimately have an outsized impact in states with vast amounts of federal land. Oil and gas production on federal lands only accounts for 9 percent of total U.S. output, but states receive a portion of the royalties collected from federal leases. The Mineral Leasing Act provides that in states other than Alaska, 50 percent of the bonuses, production royalties, and other revenues should be disbursed to the state in which the lease is located.[xi] New Mexico and Wyoming in particular depend heavily on revenue from a steady market of new oil and gas leases on the federal lands within their borders.
New Mexico is rich in crude oil reserves from the Permian Basin and natural gas from the San Juan Basin.[xii] On average, 50 percent of its oil production and 60 percent of natural gas production comes from leases on federal lands in the state.[xiii] The New Mexico Oil and Gas Association recently estimated that state revenues generated from these oil and gas operations totaled nearly $1.5 billion.[xiv] Critics of the Order fear that if the moratorium were to become permanent, the state stands to lose both jobs and revenue.[xv]
Some state lawmakers, though, see the moratorium as an opportunity to diversify the state’s energy resources.[xvi] State Senator Antoinette Sedillo Lopez (D-Albuquerque) introduced a bill that would pause the issuance of oil and gas permits for four years to study the impacts of fracking on public health and the environment.[xvii]
A similar debate is unfolding in Wyoming, where the federal government also owns a significant portion of the land over the state’s mineral resources. In Wyoming, about 51 percent of oil and 92 percent of the natural gas extracted in the state comes from federal lands.[xviii] And, like New Mexico, federal mineral extraction provides significant tax revenue in Wyoming. According to the Petroleum Association of Wyoming, the revenues from the oil and gas industry provided $1.67 billion to state and local governments in 2019.[xix]
State financing may be tied to the viability of the oil and gas industry, but some of the security afforded by the stockpile of leases acquired at the end of 2020 is also bolstered by how challenging it is to cancel an existing lease. Federal regulations from the Bureau of Land Management provide that the only way to cancel a producing lease known to contain oil or gas is through a court order.[xx] The Biden Administration’s Order does not rescind or cancel any existing permits, so its full effect on the industry will become clearer once the Department of the Interior completes its regulatory review.
[i] Exec. Order No. 14,008, 86 Fed. Reg. 7619 (Jan. 27, 2021), https://www.govinfo.gov/content/pkg/FR-2021-02-01/pdf/2021-02177.pdf.
[iii] Id. at 7624. The Order does not extend the moratorium to oil and gas leases on tribal lands.
[v] Id. at 7623.
[vi] Id. at 7624.
[vii] Order No. 3395, Secretary of the Interior, Temporary Suspension of Delegated Authority (Jan. 20, 2021), https://www.doi.gov/sites/doi.gov/files/elips/documents/so-3395-signed.pdf; see Jennifer A. Dlouhy and Ari Natter, Biden Poised to Freeze Oil and Coal Leasing on Federal Land, Bloomberg Green (Jan. 21, 2021), https://www.bloomberg.com/news/articles/2021-01-21/biden-poised-to-freeze-oil-and-coal-leasing-on-federal-land.
[viii] Chase Woodruff, Coloradans react to Biden executive orders on climate, public lands, Colorado Newsline (Jan. 28, 2021), https://coloradonewsline.com/2021/01/28/coloradans-react-to-biden-executive-orders-on-climate-public-lands/.
[ix] Western Energy Alliance v. Biden, Case 0:21-cv-00013, Petition for Review of Government Action at 1–2 (D. Wyo. Jan. 27, 2021), https://www.westernenergyalliance.org/uploads/1/3/1/2/131273598/2021-01-27_-_petition_for_review_of_government_action.pdf.
[x] Matthew Brown and Cathy Bussewitz, Oil companies stockpile drilling permits, challenging Biden on climate, The Denver Post (Jan. 10, 2021) https://www.denverpost.com/2021/01/10/oil-companies-drilling-permits-biden-climate/; Bobby Magill, Oil, Gas Industry Stockpiled Drilling Leases Before Biden ‘Pause’, Bloomberg Law (Jan. 28, 2021), https://news.bloomberglaw.com/environment-and-energy/oil-gas-industry-stockpiled-drilling-leases-before-biden-pause.
[xi] Congressional Research Service, Revenues and Disbursements from Oil and
Natural Gas Production on Federal Lands, at 2 (Sept. 22, 2020), https://www.everycrsreport.com/files/2020-09-22_R46537_a7dc7a1cdb61406e0cd5344716eccaf9e960bc72.pdf; 30 U.S.C. § 191(a) (2020).
[xii] New Mexico Legislative Finance Committee, Finance Facts: Oil and Gas Production (May 2018), https://www.nmlegis.gov/entity/lfc/Documents/Finance_Facts/finance%20facts%20oil%20and%20gas%20production.pdf.
[xiv] New Mexico Oil and Gas Association, New Analysis: Oil and Gas on Federal Lands Provided $1.5 Billion to New Mexico Budget (Feb, 2, 2021), https://www.nmoga.org/new_analysis_oil_and_gas_on_federal_lands_provided_1_5_billion_to_new_mexico_budget .
[xvi] Rachel Knapp, Pres. Biden’s temporary pause on oil, gas leases could impact New Mexico, KQRE (Feb. 2, 2021), https://www.krqe.com/news/politics-government/pres-bidens-temporary-pause-on-oil-gas-leases-could-impact-new-mexico/.
[xvii] Kendra Chamberlain, Bill would halt new fracking permits while state conducts impact studies, NM Political Report (Jan. 6, 2021), https://nmpoliticalreport.com/2021/01/06/bill-would-halt-new-fracking-permits-while-state-conducts-impact-studies/; S.B. 149, 55th Leg., 1st Sess. (N.M. 2021), https://www.nmlegis.gov/Legislation/Legislation?chamber=S&legType=B&legNo=149&year=21.
[xviii] Camille Erickson, The Biden oil and gas decision’s effect on Wyoming, explained, Casper Star Tribune (Jan. 27, 2021), https://trib.com/business/energy/the-biden-oil-and-gas-decisions-effect-on-wyoming-explained/article_b032606c-3753-5ec1-892a-d8face2c8e85.html.
[xx] 43 C.F.R. § 3136.3 (2021).