On Tuesday, the Bureau of Land Management auctioned off oil and gas leases to 11 parcels of land totaling around 15,000 acres in Nevada. It’s the latest event in a troubling trend in the Trump administration: Much as the Environmental Protection Agency has been in a mad dash to peel back environmental regulations in the lead-up to November’s election, the Department of Interior now seems to be embarking on a fire sale of public lands to oil and gas drillers in advance of a potential Democratic administration.
Cheap leases are some of the many subsidies the federal government furnishes to fossil fuel producers. The Trump administration in recent months has been especially eager to accelerate drilling by offering up federal land to fossil fuel companies at a bargain. But like much of the so-called relief Republicans have offered the struggling fossil fuel industry, this basically comes down to making drilling easier—and drilling more won’t help the oil industry right now, given the way supply is outstripping demand. After a temporary rally through mid and late summer, oil prices dropped sharply on Tuesday owing to weak demand and Saudi Arabia’s ensuing decision to slash prices. Brent crude dipped to less than $40 per barrel for the first time since June, well below the price needed for most unconventional drilling to be profitable. Six more lease sales are planned for the rest of September, spanning several Western states and fuel reserves there isn’t currently much of an appetite for.
The lease sales are clearly bad for the planet, local ecosystems, and also Native nations who often aren’t adequately consulted on such projects. For fossil fuel executives, they’re a risky bet. Some experts predict that, even with an economic recovery in the coming months, oil demand will soon start to drop off permanently. With bankruptcies among smaller firms mounting, big multinational fossil fuel producers have been selling off and writing down their investments in North America, where the high-cost, unconventional drilling that fueled the shale boom was failing to turn a profit well before the country’s first reported cases of Covid-19. A sale of New Mexico leases late last month—when oil prices were higher—drew bids averaging just $169 per acre, compared to the $1,386 per acre the state brought in through a sale before the pandemic took hold in February. Results of yesterday’s sale will be released on EnergyNet just over a week from today.
This is not a temporary problem, nor is it confined to lease sales. While the state-owned producers in OPEC can turn taps on and off in response to changing economic and political conditions, the U.S. has exercised no such authority since the 1970s, when the Texas Railroad Commission worked with major oil companies to control world oil prices. As a result, it’s mostly lost its ability to shape global energy markets. With the U.S. now unwilling to curb domestic production—indeed, with a White House hell-bent on boosting it—the country’s producers are now effectively at the mercy of other big fossil fuel exporters, namely Saudi Arabia.
A Biden administration wouldn’t necessarily reverse these trends. Though Republicans have spent the last few months fear-mongering that a Biden administration would abolish fossil fuels, his actual plan adopts a pretty light touch when it comes to polluting industries. On the campaign trail, Biden himself has reiterated in recent weeks that he wouldn’t put an end to fracking, pledging instead to halt only new drilling on federal lands. That means that the leases the Trump administration intends to sell off before November could be fully developed even if the White House changes hands.
In evaluating the climate agenda of a potential Biden administration, Rystad Energy analysts note that a “potential fracking ban on federal acreage would hardly have any impact on nationwide oil and gas output in the medium term,” due to existing drill sites and companies’ ability to move production elsewhere. Still, drilling companies are attempting to head off the modest effects of new bans under a Democratic administration by snapping up heavily subsidized federal permits. The country’s biggest oil and gas producers, Rystad found—including ExxonMobil, Devon Energy and Occidental Petroleum—have dramatically upped the percentage of their drilling on federal lands in the last two years, casting any caution about the profitability of shale production to the wind. The American Petroleum Institute perversely continues to insist that opening up more lands to drilling is crucial to restoring U.S. jobs and energy security.
There’s another downside to these sales: With the federal government now practically giving away land for oil and gas drilling, oil-producing states that levy taxes on leasing and drilling that happens on state and private lands may stand to lose important revenue streams at a time when public budgets are already under serious stress. That’s led even conservative-leaning taxpayer advocacy groups to join environmentalists in opposing the administration’s sell-off push, also fearing potential damage to Western states’ tourism economies if protected areas are opened up for extraction. Montana Senator Jon Tester—hardly a climate hawk—introduced a bill this summer called the Leasing Market Efficiency Act, which would subject federal auctions to market pressures that Trump’s Department of Interior seems keen to avoid.
Controversy over the the Trump administration’s public lands approach has led to novel alliances that have already claimed at least one victory. Last month, the White House withdrew its bid for acting BLM director William “Perry” Pendly—a fierce advocate of public lands privatization—to officially head the bureau. For now, he’s still nominally in charge. But putting him officially at the helm of BLM was deemed too much of a liability in the party’s attempts to re-elect Republican Senators Cory Gardener and Steve Daines, who are facing Democratic challengers in Colorado and Montana, respectively. And given that even some generally pro-leasing officials opposed one of the more recent sales in Utah, it’s possible the past four years of BLM-sponsored plunder may hurt Republicans in other states as well. Showering fossil fuel executives with giveaways may not be such a great political strategy after all.
