Daily on Energy: What’s in store for oil and gas leasing this year
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THE YEAR AHEAD IN OIL AND GAS LEASING: Oil and gas leasing activity is picking up at the Interior Department after slow rolling during the Biden administration’s early days as the department acts on the new leasing mandates and contingencies in the Inflation Reduction Act.
The Bureaus of Land Management and Ocean Energy Management have multiple lease sales on their docket this year and have been explicit that they’re complying with the leasing provisions in Democrats’ green energy spending law — alternatively an “all of the above” energy security bill in the eyes of Sen. Joe Manchin, who secured the provisions.
Quick reminder of the law: BLM may not issue a right-of-way for wind or solar energy developments — priorities for the Biden BLM, which is currently working to modernize its program for solar energy — on federal land unless it’s held an onshore oil and gas lease sale during the 120 days prior.
A right-of-way may also not be issued unless the bureau offered at least 2 million acres for lease in the one-year period prior, or 50% of the acreage for which expressions of interest were submitted for lease sales during that period, whichever is less.
The law implemented similar restrictions in the Outer Continental Shelf, providing that BOEM must have carried out an offshore oil and gas lease sale in the year prior in order to issue an offshore wind lease. It also brought back to life three lease sales, the final three to be contemplated in the now-expired 2017-2022 five-year program (more on its successor below) and ordered the reinstatement of Lease Sale 257, the Nov. 2021 Gulf of Mexico that was held up by a federal court.
The administration has met each of the offshore leasing deadlines contained in the mandates and said its leasing plans are being carried out to comply with the law, but the situation is politically sticky for President Joe Biden, who pledged restrictions on leasing and drilling. He remains under pressure from the oil and gas lobby to ease up on regulations and lease without holds to alleviate higher energy costs, whereas his allies in the environmental lobby are insisting the administration begin phasing out not just leasing, but also all existing production, on federal lands.
Sales on deck: BLM field offices have no lease sales planned for the first quarter, but several are in the works for Q2, the largest of which, so far, will cover 251,154 acres in Wyoming.
Q2 sales are also in the works for New Mexico, Kansas, Montana, and North Dakota, while BLM is eying Q3 for a lease sale in Nevada.
Where is Willow: Acreage for ConocoPhillips’ Willow project, located in the National Petroleum Reserve-Alaska, has already been leased, but BLM is expected to issue key environmental documents this quarter. A final environmental impact statement is expected by the end of this month, with a record of decision expected by the end of February.
ConocoPhillips has held its NPR-A leases for more than two decades but began the development permitting process in 2018. The project has generated immense opposition from environmental groups who have taken their protests against the sale to the White House.
Offshore sales: BOEM is to carry out two Gulf of Mexico oil and gas lease sales this year, both of which were brought back after Interior canceled them last May. One lease sale is scheduled for March. The other must be held by the end of September.
Beyond that, the future of oil and gas leasing in the Outer Continental Shelf is to be determined. Interior published its belated proposed five-year program in July, contemplating at most 11 lease sales through 2028, but the program is not finalized. The proposal does provide for one lease sale this year in the Gulf, if the program is finalized.
Note of changes: Leasing onshore and offshore will be a bit pricier for developers going forward. The IRA included these provisions to encourage leasing but increased minimum royalty rates and rents for lessees, which Interior has already begun implementing.
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Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Jeremy Beaman (@jeremywbeaman) and Breanne Deppisch (@breanne_dep). Email jbeaman@washingtonexaminer.com or bdeppisch@washingtonexaminer.com for tips, suggestions, calendar items, and anything else. If a friend sent this to you and you’d like to sign up, click here. If signing up doesn’t work, shoot us an email, and we’ll add you to our list.
MORE WIND AND FLOOD ADVISORIES IN EFFECT IN CALIFORNIA, NWS SAYS: The National Weather Service issued more wind and flood advisories across the California coast this morning, with rainfall expected to stretch from the Bay Area to San Diego-–areas that have already been hit by more than two weeks of deadly storms.
Today’s advisories stretched across 10 different counties and more than 500 miles. In the Bay Area, cities including San Francisco, San Jose, Santa Cruz, and Concord were told to be on alert through at least mid-morning or early afternoon.
The storms have killed at least 19 people in California so far and are expected to rank among the deadliest natural disasters in state history.
OIL PRICES DROP SLIGHTLY FROM LAST WEEK’S GAINS: Oil prices dropped slightly today from last week’s 2023 highs, despite still-optimistic forecasts for demand recovery from China as it continues to reopen its economy despite a national resurgence of COVID-19 cases.
Prices for global benchmark Brent crude fell by 86 cents to $84.42 by mid-morning, while prices for U.S.-based West Texas Intermediate slumped below $80, down to $79.07 per barrel. Last week, both contracts jumped by more than 8% as China began to reopen its economy, raising expected demand from the world’s largest fuel importer.
“While China’s outlook has turned a corner, it must be noted that the normalization of its oil demand will be gradual … As things stand, China’s oil recovery remains anticipated rather than realized,” PVM analyst Stephen Brennock told Reuters.
… Meanwhile, Russian seaborne crude exports soared last week to their highest point since April: Russian exports of seaborne crude jumped last week to 3.8 million barrels per day, a 30% increase since the previous week, and one that was underpinned largely by an increase in its shipments to the Baltic.
Russian shipments rose last week by a total of 876,000 bpd, according to vessel tracking data from Bloomberg, with shipments to the Baltic rising by 636,000 bpd during that same period.
The increase helped lift Russia’s four-week export average to its highest point since November. Read more about final destinations for Russian oil—and the rise in its reliance on a so-called “shadow fleet” of tankers to transport its crude—here.
NEW COP28 PRESIDENT WANTS TO TRIPLE RENEWABLE ENERGY GENERATION BY 2030: New COP28 president Sultan al-Jaber called for a tripling of renewable energy generation by 2030, saying in a speech this weekend the world is “way off track” to meet its climate goals and is still playing catch-up on its efforts to slash greenhouse gas emissions.
In his remarks, al-Jaber, the CEO of the state-owned Abu Dhabi National Oil Company, said this year’s summit should be one of “action,” vowing to help make the November meeting “a COP of concrete outcomes and practical solutions.”
In order to meet goals set in the Paris climate accord, he said, it is necessary to triple renewable energy generation by the end of the decade and to “more than double” the global production of low carbon hydrogen. Al-Jaber stressed the need for oil and gas from the “least carbon intensive producers” to underpin the transition to renewable energy in the meantime.
Al-Jaber, whose appointment has been criticized by climate experts, defended his credentials and noted that the UAE was the first country in the region to commit to the Paris climate agreement.
He also warned that at this year’s meeting in Dubai, the world “must be honest with ourselves about how much progress we have actually achieved, and how much further and faster we truly need to go.”
…Meanwhile, U.S. climate envoy John Kerry said he backs al-Jaber’s appointment, citing his work on renewable energy projects.
“I think that Dr. Sultan al-Jaber is a terrific choice because he is the head of the company. That company knows it needs to transition,” Kerry said yesterday in an interview with the Associated Press. “He knows — and the leadership of the UAE is committed to transitioning.”
TAX CREDIT DELAY AND WORKFORCE ISSUES HOLDING BACK WIND: SIEMENS: A shortage of qualified workers and outstanding guidance on the Inflation Reduction Act’s tax credits and incentives are keeping the wind energy sector from maximizing new investments in the near term, according to Siemens Gamesa.
A new report from the turbine maker praised the beefed-up manufacturing and other tax credits but said they’re not being put to best use yet without implementation guidance, and the “clock has already started ticking” on the life of the 10-year incentives.
“As the window to receive federal incentives narrows, the less attractive projects become for investors,” the report said, imploring Treasury to speed up publication of guidance.
Siemens Gamesa also said it was worried the IRA may “widen the expected workforce gap” in the sector by feeding demand for wind energy and requested more federal funding for training.
More on the IRA: On the tax credits, the company wants what many other interest groups want, and that’s flexibility with strict qualifications for receiving the max incentives.
Treasury has run into this most prominently with the clean vehicle tax credit. It’s happening with solar, too, where some in the sector are requesting wiggle room where taxpayers can’t access apprentices. The IRA gives the strongest possible incentives to taxpayers paying prevailing wages and employing workers via apprenticeship programs.
BOEM GAUGING INTEREST IN MAINE OFFSHORE WIND: The Bureau of Ocean Energy Management is holding a series of meetings across New England starting tomorrow to explore the extent of commercial interest in developing acreage off the coast of Maine for offshore wind.
The Outer Continental Shelf offshore Maine is virgin water for wind. The Interior Department intends for half of its 30-gigawatt offshore wind target by 2030 to be floating wind and is considering deepwater acreage off Maine to help fill the share. Other deepwater areas within Interior’s sights are off the West coast, including California and Oregon.
BOEM’s initial request for interest for the Gulf of Maine covers about 9.9 million acres.
The Rundown
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Politico EU In doomed coal village, Germany’s Greens go to war among themselves
Calendar
TUESDAY | JANUARY 17
10 a.m. The UDSA and its Rural Utilities Service will hold the first in a series of roundtables about the implementation of the Inflation Reduction Act’s $9.7 billion grant and loan program for electric cooperatives. Co-ops may enlist the funding for uses like carbon capture, energy storage technologies, and nuclear.
