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By Jennifer Hiller and Nichola Groom
(Reuters) – The promised ban by US President Joe Biden on further oil and gas drilling on federal lands would take years to halt production by major shale drillers because they have already stored permits, according to Reuters interviews with leaders.
But small independent oil drillers without the resources of big business were more concerned with Biden’s vow to toughen regulations and stop issuing new permits on federal lands, as part of his sweeping plan to fight change. climate change and reduce the economy to net zero emissions by 2050.
Federal lands are the source of approximately 10% of the United States’ oil and gas supply. Fossil fuels produced on federally managed lands and waters contribute nearly 25% of greenhouse gas emissions in the United States, according to government estimates, making it an easy target for the program. climate of the administration.
Biden’s pledge would undo former President Donald Trump’s efforts to maximize drilling and mining on federal property. But that will not end production in these areas overnight.
The seven companies that control half of the federal onshore supply in the lower 48 states have leases and permits pending that could last for years.
“We have always been very confident that we will continue to develop and drill in federal acreage,” said David Hager, executive chairman of Devon Energy Corp, the largest producer of oil on onshore federal lands in the lower 48 states. “It’s built into the rights we have in the leases and we’re doing it the right way.”
He said he expected the company’s federal land permits to last at least four years.
Other major producers on federal lands include EOG Resources Inc, ExxonMobil Corp, Occidental Petroleum Corp, ConocoPhillips, and Mewbourne Oil Company.
Representatives of these companies did not comment on this article. But several have released public statements saying they have strong stocks of federal permits and an ability to meet more stringent emissions regulations planned under Biden. They also said they could quickly move drilling to public or private areas once federal permits run dry.
EOG has said it has at least four years of federal permits. “When it comes to access to federal lands, that’s one of the things we don’t really care about in our business. We also have a lot of potential outside federal lands,” said the head of the operating Billy Helms at an investor conference last year.
Occidental said last year he had well over 200 federal drilling permits on hand and applied for about 200 more permits over the acreage of New Mexico, where some of the richest reserves lie under properties owned by the federal government.
Ameredev II, which produces about 10,000 barrels of oil per day in the Permian of New Mexico, also has federal drilling licenses for at least four years.
“We are trying to maximize our value against an uncertain range of possibilities,” said CEO Parker Reese.
Energy consultancy firm Rystad said it has seen drilling permits piling up on federal lands in the run-up to the November presidential election, with federal permit applications amounting to 31% of all applications for permits in the main US oil fields, up from 18% in 2019.
Biden’s team did not respond to multiple requests for comment and it was unclear when his administration might act on a drilling ban.
Most federal onshore drilling takes place in western states such as New Mexico, Colorado, and Wyoming, which receive a share of and depend on extraction royalties.
As Biden takes office, the US shale drilling industry has already fallen sharply due to low prices.
Total shale production in the United States is expected to fall to 7.5 million barrels per day in February, the U.S. Department of Energy said on Tuesday, which would be the lowest since June 2020.
Shale drilling accounts for about two-thirds of crude oil production in the United States, but production is expected to decline through 2021 as producers limit spending.
‘EXISTENTIAL THREAT’
Much of the industry is made up of small businesses that cannot afford to get rid of permits, install new emissions control technologies, or do business elsewhere.
“The impact on the independent tanker is far greater than on Big Oil,” said Don Law, owner of Denver-based Prima Exploration Inc, which produces about half of its 1,000 barrels of oil per day on the land. federal. , mainly in Wyoming, New Mexico and North Dakota.
Law called Biden’s promised policy an “existential threat,” unlike any he has encountered in 40 years in the oil business, echoing rhetoric used by some climate activists about the threat posed by global warming .
Many small drilling companies operate in a single state or basin, according to the Western Energy Alliance business group, and would struggle to pack their bags and go.
“I live here,” said Mark Murphy, a third-generation oil tanker in New Mexico. His company, Strata Production Co, has 15 employees and operates 47 wells, mostly on federal land.
WEA, the oil and gas industry’s most policy-oriented public lands trading group, is committed to fighting any effort to impose a rental ban in court. States that rely heavily on revenues from federal oil and gas drilling are also intensifying opposition.
Wyoming officials last month released a study that found a ban would cost eight western states $ 8.1 billion in tax revenue and $ 34.1 billion in investment over the next five years. State Governor Mark Gordon called the predictions “devastating.”
New Mexico Democratic Governor Michelle Lujan Grisham said at the end of 2019 that she would seek a waiver of any drilling ban imposed by a future administration. But she has not publicly discussed the matter since, and her office has not responded to multiple requests for comment.
(Reporting by Jennifer Hiller and Nichola Groom; editing by Richard Valdmanis and David Gregorio)
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