What’s Up With the 9.000 Approved Permits?: The Oil and Gas Industry, the Biden Admin, and Secretary Granholm’s Speech

President Biden campaigned on stopping oil and gas leasing on Federal land. Many decisions of the Biden Administration have created the impression that the oil and gas industry is not an appreciated partner in the energy transition. So what would it take to… make peace between the Admin and the industry and outline a role for the oil and gas industry during the transition. Secretary Granholm in her talk (see below) is moving in that direction, but what would it take to make “we need you at least for a while” into policy?

Perhaps a bipartisan commission? Where climate, national security, international relations, and considerations of people in the US are all incorporated? With a reality check for practicality, with practitioners from the entire energy supply chain involved? Of course, plenty of academics, especially energy experts. Also a look at the environmental and health impacts of alternatives at scale. We can imagine all the expertise that could be brought to bear to develop a roadmap. And the roadmap could encourage investment in oil and gas production within the framework. So all the climate policies across numerous agencies (e.g. climate and the SEC) would be following the same roadmap. Can you imagine? President Biden also talked about uniting, and such an effort would move in that direction. Representatives of Native Americans also called for an “all of the above” strategy when the DOI folks asked for their input on federal leasing. So it seems like there’s a tremendous zone of agreement.

Anyway, we’ve heard from Jen Psaki at the White House, as well as Energy Secretary Granholm (and many media and ENGO sources) something along the lines of “the industry has 9,000 permits (onshore, federal) while calling for more drilling”. So why does industry say those permits are currently unused?

Here’s the industry (independent, non-major) letter to the President, from their point of view on what it takes at the ground level.

Now, it is true that there are also about 9,173 outstanding approved permits, but there are factors that cause companies to wait to drill those wells:

• Because of the uncertainty of operating on federal lands, companies must build up a sufficient inventory of permits before rigs can be contracted to ensure the permits stay ahead of the rigs. Companies drill wells in a matter of days and rigs are very expensive, so it’s a delicate balancing act.

• The federal permit to drill is not the only government approval required. Rights of Way (ROW) can take years to acquire before companies can access their leases and put in natural gas gathering systems. With the pressure not to flare from regulators and investors, most companies cannot drill before gathering lines are in place. Timely approvals of ROWs would enable companies to develop sooner.

• Your administration has worked with anti-oil-and-gas activists to stop or slow pipeline infrastructure. Without pipelines to move the oil and natural gas produced, wells cannot be developed.

• Capital must be acquired. Activist investors, encouraged by an administration intent on expanding its financial regulatory powers, have worked to de-bank and de-capitalize the industry. Many companies, particularly the small independents who drill the majority of federal wells, are having difficulty acquiring the credit and capital necessary to develop. By ending bureaucratic efforts to deny financing to the industry, you would be sending a powerful signal to the U.S. and world markets that investments in oil and natural gas in the U.S. are safe and new production should move forward.

Other interesting points in the letter..

Leases
There are about 37,496 onshore leases in effect and actually 12,068 nonproducing leases, a 66% utilization rate, which is quite high. But there are many reasons not all leases will be used.

• Many leases are held up in litigation by environmental groups. For example, Western Energy Alliance is in court defending over 2,200 leases, most of which cannot be developed while those cases are ongoing.
• Companies must put together a complete leasehold before moving forward, particularly with the long horizontal wells that can cut across multiple leases. Sometimes a new lease is needed to combine with existing leases to make a full unit. Since the leasing ban remains in effect with no onshore lease sales held since 2020, some leases are held up, waiting for new leases or for the government to combine them into a formal unit.
• Before allowing development on leases, the government conducts environmental analysis under NEPA (the National Environmental Policy Act), which often takes years to complete. Many leases can be hung up by NEPA or awaiting other government approvals.
• Finally, not all leases will be developed because, after conducting exploratory work, companies may determine there are not sufficient quantities of oil and natural gas on them.

What the Admin could do to help:

Permits
There are 4,621 permits to drill awaiting approval by the Department of the Interior’s Bureau of Land Management. Your appointees could approve these permits now, enabling companies to forward with development.
So, yes Mr. President, your administration is “holding the industry back” in direct contradiction to your statements last week when you said your administration was not. The most recent example: according to published reports this week, the US Bureau of Land Management approved 95 permits to drill in January 2022, compared with 643 in April 2021 – the height of the pandemic.
If you want to truly be helpful, pick up the phone and direct Secretary Haaland to approve the permits immediately. We stand ready to assist in any way possible.

Energy Secretary Granholm gave this interesting talk at CERAweek 2022 in Houston on March 9.

Bravo to BP, Exxon, Shell and others in the private sector who are withdrawing from Russian operations. But there’s more to do. There are more battles.

Putin’s actions have sent the oil market reeling. I don’t have to tell you that when oil is $109 a barrel, and $4.25 at the pump, the impacts are severe and real for people who buy your product—regular working folks, from Uber drivers to teachers to farmers.

So, what else can we do in this fight? We are on a war footing—an emergency—and we have to responsibly increase short-term supply where we can right now to stabilize the market and to minimize harm to American families.

That means releases from strategic reserves across the world, like we’ve done. And that means you producing more right now, where and if you can.

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That means we have to deploy clean technologies as fast as possible—but we’re under no illusion that every American will get an EV or a heat pump tomorrow or next month or next year.

It is a transition…and we’re pragmatic about what it means. We know it won’t happen overnight.

And we’re serious about decarbonizing while providing reliable energy that doesn’t depend on foreign adversaries.

That means we’ll walk and chew gum at the same time. So yes, right now, we need oil and gas production to rise to meet current demand.