The Biden administration will restart oil and gas leasing on federal lands as it comes under increasing pressure to bring down high petrol prices, backing away from a freeze that had riled industry executives.
Around 144,000 acres of public lands will be put up for sale next week, the interior department said on Friday, marking the end of a moratorium on new leases imposed by the president in one of his earliest acts in office. In June last year, a federal court in Louisiana ordered the Biden administration to restart the leasing programme.
The new leases will charge higher royalty payments from oil and gas producers than before — 18.75 per cent compared with 12.5 per cent previously — and significantly cut back on the amount of land that will be auctioned compared to what the industry had asked for.
“Today, we begin to reset how and what we consider to be the highest and best use of Americans’ resources for the benefit of all current and future generations,” said Deb Haaland, interior secretary.
The move comes as President Joe Biden finds himself under intensifying political pressure over high fuel prices, which have driven soaring inflation. The national average price of gasoline on Friday was $4.07 a gallon, down from a recent high last month of $4.33 a gallon, but still more than 70 per cent higher than when the president took office.
Biden has pulled various levers at his disposal in an effort to bring down prices. Earlier this month he announced an unprecedented release of 180mn barrels of crude from the government’s strategic stockpiles, which contributed to a recent decline in global oil prices.
He has also leaned on allies in the Gulf and American oil and gas producers to raise output, though without much success. The leasing announcement comes just days after the administration’s latest effort to temper prices by lifting seasonal restrictions on ethanol blends in petrol.
The energy crisis has taken precedence over the administration’s climate agenda in recent months, frustrating environmentalists.
Combating climate change was central to the president’s election campaign, and he had pledged on the trail that there would be “no more drilling” on public lands if he were elected. In January 2021, he signed an executive order freezing new lease sales on the country’s 245mn acres of public lands pending a review. A report published by the interior department last November suggested that the system should be overhauled.
Oil and gas production from federal onshore lands makes up less than 10 per cent of total US output and restarting leasing that will take months if not years to yield new output is unlikely to make a big difference to global oil prices, analysts say.
Frank Macchiarola, senior vice-president at The American Petroleum Institute, the oil industry’s largest lobbying group, said he welcomed the restarting of leasing but said holding back acreage and raising royalty rates could “discourage oil and natural gas investment on federal lands”.
“We are concerned that this action adds new barriers to increasing energy production, including removing some of the most significant parcels,” said Macchiarola.