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Interior offshore oil drilling plan skirts tough choices

The Biden administration proposed an offshore drilling plan that could have anywhere from zero to 11 lease sales, a move that pushes the politically fraught decision on oil and gas production off for months and is likely to frustrate both fossil fuel supporters and climate change advocates.

The plan from the Interior Department was released just one day after the Supreme Court issued a ruling sharply limiting EPA’s power to curb pollution causing climate change — and as gasoline prices remain near record highs. Those fuel prices are a key contributor to inflation, which has emerged as a top concern for voters ahead of the November mid-term elections.

The administration’s plan, if finalized, could allow up to 10 lease sales in the Gulf of Mexico and one lease sale in Alaska’s Cook Inlet, both areas where oil and gas production is currently taking place. But it would reserve the right to scrap those sales after it gathers input during a 90-day public comment period for the plan that would replace the five-year offshore drilling plan that expired on Thursday.

That range of options shows the administration is in effect punting a politically fraught decision on new offshore drilling, which he had promised to end on federal lands and waters during the 2020 campaign. While the public comment period runs to the end of September, Interior could still take more time to analyze the comments before making its final plan known, a senior administration official said in an interview.

“The proposed plan narrows the discussion to only areas where there is already existing production and infrastructure,” the person said. “We believe this proposal is an opportunity to allow the public to meaningfully engage in the ongoing discussion we’re having about how to best meet the nation’s energy needs and achieve the transition to a clean energy economy.”

High fuel prices have eaten away at Biden’s approval rating, and given Republicans a handy weapon to wield against Democrats, who are under pressure from environmental groups to curtail methane emissions from the fossil fuel industry to combat climate change, said Matt Smith, lead oil analyst at analytics firm Kpler.

“They’re damned if they do and damned if they don’t,” Smith said of the administration’s options in an interview ahead of the announcement. “If they do, they come under criticism for pursuing fossil fuels. If they don’t, they’ll be blamed for stymying oil production and boosting prices.”

If the administration chooses to offer no lease sales, it would be the first time since the program began in 1980 that the government declined to put the waters off the Gulf of Mexico up for lease for oil production. It would also be a major political gamble for Biden, who came into office promising to put the U.S. on a path to net-zero greenhouse gas emissions but has pivoted to call for increased oil and gas production as inflation soared.

Gasoline prices have slipped from the recent high of $5.00 a gallon set in mid-June but still remain elevated at $4.82 a gallon. Americans have pointed to inflation as the top issue facing the country, contributing to Biden’s poor approval ratings.

“If they sacrifice Gulf of Mexico oil and gas leasing, it will have devastating consequences for our country for decades,” said Erik Milito, head of trade group National Ocean Industries Association, which supports offshore oil and production.

Sen. Joe Manchin, the West Virginia Democrat who chairs the Senate Energy and Natural Resources Committee and is the oil and gas sector’s biggest Democratic supporter in the chamber, expressed apprehension that Interior even included an option that would include no lease sales.

“I am disappointed to see that ‘zero’ lease sales is even an option on the table,” Manchin said in a press release. “I hope the Administration will ultimately greenlight a plan that will expand domestic energy production, done in the cleanest way possible, while also taking the necessary steps to get our offshore leasing program back on track to give the necessary market signals to provide price relief for every American.”

But if it continues offering lease sales, environmental groups are likely to accuse Biden of failing to deliver on his promise to wean America away from fossil fuels as climate change amplifies increasingly devastating weather patterns across the country. U.S. methane emissions, which had fallen in 2020 when drilling slowed amid the Covid pandemic, are now poised to be higher than they had been in 2019, energy and environmental analysis firm Kayrros said in a report Friday.

“The President promised to lead on climate change, and this would be incompatible with leading on climate change,” said Diane Hoskins, campaign director at conservation group Oceana. “We must reduce our dependence on fossil fuels and lead on clean energy. This would lead to dangerous, offshore drilling.”

Interior had been under political pressure to release the plan. Interior Secretary Deb Haaland had promised senators on the Energy and Natural Resources Committee to have it finished by June 30, and delivered a proposal to the White House several weeks ago, people familiar with the matter told POLITICO. That started a debate among staff whether to stick with the recent pace of two lease sales a year for the Gulf Of Mexico in an effort to avoid criticism the administration wasn’t concerned with fuel prices, or to stick with Biden’s climate message and halt new leasing.

“Over the past several days the pressure to appease the environmental base is gaining ground,” said one industry representative who had been in touch with the White House on the proposal, requesting anonymity to discuss private conversations.

Despite the uproar, the impact of new offshore leases wouldn’t be felt for several years.

New leases in the Gulf of Mexico take at least five years to deliver oil and gas, analysts have said. And the sale of new leases also doesn’t automatically lead to new production: Exxon, Shell, BP and other companies possess thousands of leases purchased in earlier sales that are not currently developed.

Even with no new leases, the Gulf of Mexico is expected to produce roughly the same number of barrels of oil at the end of 2023 as it is today, the U.S. Energy Information Administration said in an analysis published earlier this month.

Five-year plans, which Interior first started crafting in 1980, identify which parts of the federal offshore acreage companies can lease for oil and gas production and when those leases will occur. Over the years, the relatively calm waters of the oil-and-gas rich U.S. Gulf of Mexico have emerged as the dominant area of most industry’s attention, and more oil is produced in the region than anywhere else in the United States except Texas.

This particular update has drawn outsized attention since the Trump administration published a first draft in 2018 that would have opened all federal waters to drilling, including those off the East and West Coasts, as well as Florida, where it is currently banned.

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