When U.S. President Joe Biden signed a landmark, US$369-billion climate and energy package into law earlier this week, the price of the deal was a promise to make more federal lands available for oil and gas drilling. But that doesn’t mean U.S. fossil companies are terribly keen to bid on those leases.
At the behest of coal baron Sen. Joe Manchin (D-WV), the Inflation Reduction Act “reinstates old auctions that the Biden administration has tried to cancel and forces the administration to hold several new auctions over the coming years,” Grist reports. “The legislation also requires that the government auction millions of acres of oil and gas leases before it can auction acreage for wind and solar farms.”
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That additional lease on life (so to speak) for the oil and gas industry was enough for the U.S. Center for Biological Diversity to declare the overall spending package a “climate suicide pact,” Grist notes.
“It’s self-defeating to handcuff renewable energy development to massive new oil and gas extraction,” declared the center’s director of government affairs, Brett Hartl, shortly after Manchin’s initial deal with Senate Majority Leader Charles Schumer (D-NY) was announced. “The new leasing required in this bill will fan the flames of the climate disasters torching our country, and it’s a slap in the face to the communities fighting to protect themselves from filthy fossil fuels.”
But “even if the government does keep auctioning off federal territory, it’s far from certain that oil and gas companies will want to build new drilling operations on that territory,” Grist writes. “The industry has shifted resources away from federal lands and the Gulf of Mexico in recent years, and there’s currently less capital available than ever for new production in these areas.”
The bigger problem with the leasing provision, the news story adds, is that it won’t reduce consumer energy costs in the short term and may slow down the shift to renewables over the longer haul.
But “in terms of oil, our view is that virtually all of the highly prospective [onshore] acreage is already leased and held,” said former fossil strategist Raoul LeBlanc, now a vice president for energy at S&P Global . “In that sense, opening up a lot of auctions for more development is unlikely at this point to yield a lot of actual activity.”
Grist contributing writer Jake Bittle says fossils are less interested in the Gulf after drilling it “for all it was worth” in the last century. Now, some of them are focused on the vast, mostly privately-held fracking fields in North Dakota, Texas, and New Mexico, while companies like ExxonMobil are focusing their attention in other countries—Exxon, for example, is busy in Guyana and Suriname.
In the Gulf, available acreage has declined by two-thirds in the last decade as fossils elected not to renew their existing leases. “The only producers who still have any appetite for offshore acreage, according to LeBlanc, are the largest oil majors, like Hess and Shell, who can afford to spend hundreds of millions of dollars on rig projects that may take as long as a decade to build,” Bittle writes. “These offshore rigs are far costlier to start up than new shale drilling rigs, and they come with significant legal and environmental liabilities.”
And when it comes to decades-long investments, many fossils are figuring out that the shift off carbon will drive down demand. So while “it’s not like the onshore, where you may have a party and nobody shows up,” LeBlanc said, “people are also not crazy for this.”
Grist has the rest of the story here.
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