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Biden Oil Halt Called ‘Crushing Blow’ to Western U.S. States

Jan. 28, 2021, 10:00 AM

Western state officials say President Joe Biden’s executive order halting new leases for oil and gas leasing on federal lands will slash investment, cut jobs, drop wages, and pummel tax revenues throughout the region.

Biden issued several directives Wednesday designed to fight climate change, including the leasing pause, a review of fossil fuel subsidies, and other measures to overhaul the U.S. energy mix.

State officials cited dramatic figures about the economic impact of a leasing halt from a University of Wyoming study in December conducted for the Wyoming Energy Authority, an agency whose mission is “to advance the state’s energy strategy by supporting Wyoming’s full energy portfolio.”

The calculations show that in the president’s first term alone, gross domestic product across eight oil and gas producing states—Alaska, California, Colorado, Montana, New Mexico, North Dakota, New Mexico, and Utah—will decline by $33.5 billion, slashing 58,786 jobs, $15 billion in wages, and $8.3 billion in state tax revenues.

Wyoming and New Mexico would be the hardest-hit states, according to the University of Wyoming report. The Wyoming study showed New Mexico would face annual losses of $2.6 billion in drilling investment from 2021 to 2025, while Wyoming’s would be $2.3 billion.

The criticism highlights the challenges facing the Biden administration as it seeks to transition to a carbon-free economy nationwide, including in states currently still reliant on oil and gas revenues.

“The president’s decision to halt federal leasing on oil and gas under the guise of a ‘pause’ is beyond misguided,” Wyoming Gov. Mark Gordon (R) said Wednesday. “It is disingenuous, disheartening, and a crushing blow to the economies of many Western states, particularly Wyoming. No matter how it is framed, this action is still a ban on leasing.”

Bad Timing

Western officials said the suspension of oil and gas leasing is illegal, and particularly ill-timed with the Covid-19 pandemic.

“Blocking future oil and gas leases on 700 million acres is an unlawful attack on the livelihoods of the people in my district,” said Rep. Lauren Boebert (R-Colo).

Environmental groups, which applauded Biden’s move to pause new oil and gas leases to review them, said such public lands leasing undermines the fight against climate change and underpays taxpayers.

“We’re going to start to properly manage lands and waterways in ways that allow us to protect and preserve them, the full value that they provide to us for future generations,” Biden said on Wednesday in announcing the “reset” to the oil and gas leasing program.

Addressing criticism of impacts on jobs, he also said the administration was committed to creating millions of jobs in clean energy generation, land restoration, abandoned mine cleanup, plugging of orphan oil and gas wells, energy efficiency, clean transportation, advanced manufacturing, and sustainable agriculture across the U.S.

“When we say climate change, eventually people are going to think jobs, like President Biden,” said former Environmental Protection Agency Administrator Gina McCarthy, now a national climate adviser to Biden.

But Kathleen Sgamma, the president of the industry group Western Energy Alliance, said the order would “harm the livelihoods of tens of thousands of Westerners and put at risk millions more as states services become unfunded.”

Her group filed a petition on Wednesday in federal court in Wyoming seeking to block Biden’s order. Wyoming ranks first in federal natural gas production and third in oil, and has more federal acres leased than any other state, the Alliance said.

New Mexico Revenues

Ryan Flynn, president of the New Mexico Oil and Gas Association, said Wednesday that nearly one-third of the state’s revenues come from oil and gas, providing money for universal preschool access and higher education.

“We share President Biden’s goal to take steps to address climate change, but we need to do it in a way that makes sense and doesn’t damage the New Mexico economy,” he said at an American Petroleum Institute briefing.

New Mexico Democratic state officials, though, have generally favored limits on the oil and gas industry to fight climate change. The state is developing methane rules leaders say will be some of the most stringent in the country.

New Mexico Commissioner of Public Lands Stephanie Garcia Richard has also in recent years prioritized making more money off oil and gas leases on state land and changing policies to benefit the environment. That included implementing minimum bids for sales, pushing for royalty rate increases, and halting fresh water sales for fracking from state trust land.

New Mexico Gov. Michelle Lujan Grisham (D) said her state’s agencies are still analyzing the full impact of Biden’s order.

“It is essential that climate change be prioritized,” she said. “Our administration is reviewing these orders to evaluate the scope of the impact they will have on our state and continue to be in close conversation with leaders in the industry.”

—With assistance from Paige Smith.

To contact the reporters on this story: Tripp Baltz in Denver at abaltz@bloomberglaw.com; Brenna Goth in Phoenix at bgoth@bloomberglaw.com

To contact the editor responsible for this story: Anna Yukhananov at ayukhananov@bloombergindustry.com

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