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Democrats Eye Staying Power of Their Oil-and-Gas Leasing Plans

March 26, 2021, 2:45 PM

Democrats hope that legislation overhauling oil and gas on federal lands will stamp their climate imprint on federal fossil fuels leasing well into a future GOP administration.

Earlier versions of the package of five House bills failed in previous Congresses. But the newer versions, despite having no GOP backers so far, have brighter prospects with Democratic control of both the House and Senate. They propose to end non-competitive leasing on federal lands, control methane leaks from oil and gas infrastructure, ensure wells are sufficiently bonded and, among other things, boost public input on leasing.

The proposed reforms would have the ability to withstand a Trump administration-style reversal from a future president eager to roll back Biden administration fossil fuel restrictions. If it’s a law, both the House and the Senate would have to agree to undo it, which would make it harder to reverse than an agency rule.

“When Congress passes a law, it tends to be durable. The reforms before you today will prevent administration swings back and forth across time,” Tracy Stone Manning, associate vice president of the National Wildlife Federation, said at a March House Natural Resources subcommittee hearing on the legislation.

The legislation includes a bonding reform bill (H.R. 1505), an oil and gas production transparency bill (H.R. 1506),a bill to restore community input in oil and gas leasing, (H.R.1503), a bill to curtail methane leaks in oil and gas infrastructure (H.R. 1492), and a bill to reform fiscal terms for oil and gas development (H.R. 1517).

The House is considering the package, which was introduced in early March, as the Biden administration decides how much to curtail oil and gas activity on federal lands. Biden pledged during his presidential campaign to end all federal oil and gas leasing as part of his climate plan.

Updating Leasing System

The Bureau of Land Management allows oil and gas leases not sold at auction to remain available non-competitively on a first-come first-served basis for two years following the lease sale. The Government Accountability Office found in November that leases sold this way generate little revenue for the federal government.

The bills are updates to a leasing system shaped by laws enacted more than half a century ago, and they’ll help protect the environment and the climate, said Rep. Alan Lowenthal (D-Calif.), who’s sponsoring an oil-and-gas-well bonding reform bill.

House Natural Resources Committee Chairman Raul Grijalva (D-Ariz.) highlighted the legislation’s potential impact ahead of an Interior Department public forum Thursday on the future of the Biden administration’s federal lands oil and gas leasing moratorium.

“The time is right to update America’s relationship with the fossil fuel industry to more accurately reflect modern economic and environmental thinking,” Grijalva said in a statement.

Bad Faith Effort

Some Republicans and the energy industry see a bad-faith effort to solidify an anti-fossil fuels agenda, regardless to the cost to the industry itself and its workers.

“Are you trying to imply that these are not completely legitimate efforts to balance the need for affordable energy with the need for community input and environmental sturdiness,” Michael McKenna, a GOP energy strategist and former energy adviser to the White House during the Trump administration, said when asked about the Democrats’ strategy with the legislation.

The bills “are all intentionally designed to make it more difficult to pan for gold—explore for and produce oil and gas,” McKenna said.

Republicans are confident that the Senate legislative process will force what they see as the bills’ most objectionable provisions to be left on the cutting room floor, he said.

Oil and gas companies see the legislation as so “fundamentally changing the federal onshore oil and gas natural gas program,” that the bills are unlikely to pass muster even in the Democratically-controlled Congress, said Kathleen Sgamma, president of the Western Energy Alliance, a trade group representing oil companies operating on federal land.

But Congress may be right to restrict leasing on federal lands, in part because the market will turn the tide on the industry, said Sam Kalen, a natural resources law professor at the University of Wyoming in Laramie.

Oil and gas wells drive climate change as they leak and flare methane into the atmosphere, and operators often avoid paying their fair share to drill federal lands by taking advantage of non-competitive leasing, he said.

“We know that it makes little sense to continue to lease on public lands because at some point in the future, the market will not value those resources” due to fossil fuels’ effects on climate change, Kalen said.

To contact the reporter on this story: Bobby Magill at bmagill@bloombergindustry.com

To contact the editors responsible for this story: Chuck McCutcheon at cmccutcheon@bloombergindustry.com; Rebecca Baker at rbaker@bloombergindustry.com