Study claims minimal economic impact from US federal onshore leasing moratorium

us oil production rig

The moratorium for new oil and gas leases on onshore federal land looks to have a minimal economic effect on the US Rocky Mountain region, according to a study by the Conservation Economics Institute.

“We found minimal if any impacts from the pause in oil and gas leasing,” Joshua Axelrod, senior advocate at the Natural Resources Defense Council, said Aug. 4. “We found multiple benefits. Oil and gas development actually repels people from these areas.”

CEI is recently created nonprofit organization that provides research on economic and environmental issues. The Center for Western Priorities and NRDC supported the study on the moratorium.

“The federal oil and gas leasing program is woefully inefficient and outdated,” CEI director Evan Hjerpe said. “These result in heavy subsidies to oil and gas companies and a poor return to the public. There was a need for the Biden oil and gas leasing pause.”

He said he expects the moratorium, or pause, to extend no longer than one year, but it was likely there might be a need for extended leasing pauses in the future.

No new leases being offered

The Biden administration issued the moratorium on its first day in office. A federal judge has since overturned the leasing moratorium, but the Bureau of Land Management offices have yet to resume offering new leases.

The CEI study contends oil and gas companies hold enough leases issued prior to the moratorium to extend drilling programs for decades. The producing US Rocky Mountain states include Colorado, Wyoming, New Mexico, Utah and Montana.

“For regional economic effects in the Intermountain West, we have found impacts to be minimal in the short term, as the most resource-reliant states have ample stockpiles of leases and permits to easily continue the status quo in terms of new drilling on federal lands,” the study said.

Acreage for ‘decades of drilling’

Wyoming holds nearly 5 million acres of non-producing federal leases, while the next closest, Utah holds 2 million.

“Wyoming producers are the most reliant on federal leases, but it already holds ample acreage to provide for decades of drilling,” Hjerpe said. “Medium-intensity drilling results in 10 years of drilling programs in New Mexico and up to 60 years in Wyoming on federal land with no new leases.”

Still, data by S&P Global Platts Analytics shows substantial production could be at risk by 2025 under a lengthy moratorium. A permanent halt of new drilling permits on federal lands and waters puts 1.1 million b/d of oil output and 3.7 Bcf/d of gas output at risk by 2025 if existing permits and drilled-but-uncompleted wells are allowed to continue.

There are about currently 3,200 stockpiled permitted wells on federal lands as well that operators can lean on in the event of a policy change. More than 2,000 of those are in New Mexico over the Permian Basin.

A total federal drilling ban would cut oil output by 1.6 million b/d. Tighter emissions controls would also crowd out marginal producers. About 750,000 b/d and 9 Bcf/d of production in the US comes from low-producing stripper wells, potentially more vulnerable to costs of increased regulations, according to Platts Analytics.
Source: Platts

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