MUCH ADO ABOUT NOTHING…YET
Yesterday, Biden extended the 60-day freeze of new permits and leases in federal lands by Executive Order to “indefinitely” to “help restore balance on public lands and waters”. The order will direct the Department of the Interior to pause new oil and natural gas leasing on public lands and offshore waters, concurrent with a comprehensive review of the federal oil and gas program. This is NOT a ban, but rather a “review” of policy.
I have already noted that companies have stockpiled millions of acres of leases on public lands in anticipation of this move by the Biden administration. There is more than 26 million acres under lease to the oil and gas industry onshore, nearly 13.9 million (or 53 %) are unused and non-producing. Offshore, of the more than 12 million acres of public waters under lease, over 9.3 million (or 77 %) are unused and non-producing. Onshore and offshore, the oil and gas industry is sitting on approximately 7,700 unused and approved permits to drill.
The Trump administration conducted a large sale of public lands and waters, offering more than 25 million acres onshore during the past four years, 5.6 million of which were purchased. Offshore, more than 78 million acres were offered for lease to oil, gas, and mineral development, and only 5 million acres were purchased. This should give you a good picture of the demand situation, pretty lackluster anyway.
HIDDEN GEM
Also noteworthy, buried in yesterday’s news was the fact that, the Biden administration has issued at least 31 new drilling permits authorizing operations on federal land and coastal waters, despite an order to freeze such activities.
“Offshore, the Bureau of Safety and Environmental Enforcement has issued 22 drilling permits to eight companies since Jan. 20, when President Joe Biden was inaugurated. Recipients have included BP Exploration and Production Inc., Arena Offshore, Shell Offshore Inc. and a BHP Billiton Petroleum subsidiary, according to a Bloomberg News review of an Interior Department database.
Onshore, the Bureau of Land Management issued nine permits for wells in Montana, New Mexico and Wyoming on Jan. 20 and Jan. 21, according to a review of a separate database by the watchdog group Accountable.US. The companies that received the authorizations were Jonah Energy LLC, Burlington Resources Oil & Gas Co. LP and Legacy Reserves Operating LP.
The offshore approvals, for wells in the Gulf of Mexico, have been issued on a steady basis since Biden’s inauguration, including this week.
The Interior Department said in a statement that permits for valid, existing leases “are continuing to be reviewed and approved.”” -BBG
“Watch what they do not what they say” seems to be the apropos mantra in this particular case at this juncture.
For the immediate term, I foresee no effect on the industry. If this halt becomes permanent and actually enforced, over the long term, this would be highly bullish, oil and oil stocks.
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