The Biden administration is cancelling three oil and gas lease sales scheduled in the Gulf of Mexico and off the coast of Alaska, removing millions of acres from possible drilling as U.S. gas prices reach record highs.
The Interior Department announced the decision Wednesday night, citing a lack of industry interest in drilling off the Alaska coast and “conflicting court rulings'' that have complicated drilling efforts in the Gulf of Mexico, where the bulk of U.S. offshore drilling takes place,
The decision likely means the Biden administration will not hold a lease sale for offshore drilling this year and comes as Interior appears set to let a mandatory five-year plan for offshore drilling expire next month.
“Unfortunately, this is becoming a pattern – the administration talks about the need for more supply and acts to restrict it,'' said Frank Macchiarola, senior vice-president of the American Petroleum Institute, the top lobbying group for the oil and gas industry.
“As geopolitical volatility and global energy prices continue to rise, we again urge the administration to end the uncertainty and immediately act on a new five-year program for federal offshore leasing,'' he said.
The lease cancellations come as gas prices have surged to a record $4.40 a gallon amid the war in Ukraine and other disruptions that have pushed prices $1.40 a gallon higher than a year ago. Consumer prices jumped 8.3 per cent last month from a year ago, the government said Wednesday.
A federal appeals court in New Orleans, meanwhile, is considering a challenge to a moratorium on new federal leasing that Biden imposed soon after taking office in January 2021. Biden said the administration needed to consider the effect of new drilling on climate change and conduct proper environmental reviews.
Louisiana and 12 other states challenged Biden's order, saying laws passed in response to the 1970s oil crisis require lease sales on federal lands and waters.
The Biden administration failed to “grapple with prior analyses” of the planned sales to give a valid reason for postponing or canceling them, Louisiana Deputy Solicitor General Joseph Scott St. John told a 5th U.S. Circuit Court of Appeals panel this week.
The three-judge panel did not indicate when they will rule.
Environmental groups hailed the latest lease cancellation, saying the administration needs to do more to curb greenhouse gas emissions from fossil fuels that are driving climate change.
Republicans denounced the decision as harmful to consumers and U.S. national security.
The state challenge to Biden's leasing order has not yet gone to trial, but a federal judge blocked the order in a preliminary injunction last year, writing that since federal law does not state the president can suspend oil lease sales, only Congress can do so.
Oil companies say they have increased production as the economy recovers from the coronavirus pandemic, but they have been reluctant to ramp up production further, citing a shortage of workers and restraints from investors wary that today's high prices won't last. Decisions by the OPEC+ oil cartel, led by Saudi Arabia and Russia, to increase supplies only modestly to the world market have also kept prices high.
Major oil companies reported surging profits in the first quarter and are sending tens of billions of dollars in dividends to shareholders, along with stock buybacks that have sharply increased the value of investor holdings.
© 2022 The Canadian Press