Oil and gas takes another hit with suspension of federal leases

The oil and gas industry in Montana and North Dakota took another hit Thursday when the Department of the Interior announced it will suspend new oil and gas leases on federal lands for 60 days as part of a broad review of Interior’s programs.

The move is a first step toward making good on promises that newly sworn in President Joe Biden made on the campaign trail to halt new drilling and hydraulic fracturing on federal lands.

The suspension won’t limit activity under already existing leases. Companies can continue to drill and develop those acres.

Presently, about 20 percent of Montana’s existing oil wells are on federal lands. Most of that production, however, is not Bakken-related, and most Bakken minerals can avoid federal leases, according to the Montana Board of Oil and Gas Conservation.

In North Dakota, the figure of wells that could be affected is more like 30 percent, and could potentially represent a more substantial amount of the state’s Bakken production.

Some companies, particularly in North Dakota, were working to drill out federal leases throughout the pandemic, according to Department of Mineral Resources Director Lynn Helms just in case there was a change in administration. That move by industry could blunt the effect of the Biden administration’s action for a while, and lead to production that could legally continue for years after that.

The move drew immediate backlash from lawmakers in the MonDak, as well as industry representatives.

“This is simply just awful and put our country’s energy dominance at risk,” North Dakota Petroleum Council President Ron Ness said. “About 25-30 percent of our wells and production is on federal minerals. Consumers beware, this is a step in the wrong direction for our country and will lead to higher energy prices, less jobs and big impacts to producing states.”

Montana Petroleum Association President Alan Olson was also contacted for comment. His statement will be added to this story when received.

Sen. Steve Daines, R-Montana, called it an attack on American energy.

“I guess @JoeBiden cares more about workers in Saudi Arabia than in the United States. In less than 36 hours, our new president has declared war on the American energy industry,” he said. “He killed the Keystone XL pipeline, re-entered the disastrous Paris Climate Agreement, and now, he’s trying to freeze oil, coal and gas leases on federal land. This is an outright attack on American energy and union jobs.”

Rep. Matt Rosendale, R-Montana said he is opposed to the suspension. “I am concerned with how this will impact Montanans and the economy,” he said.

Energy production on federal lands supports thousands of jobs, Rep. Kelly Armstrong, R-North Dakota said.

“(It also) provides millions of dollars for our schools, hospitals, roads and conservation,” he added. “This misguided effort will crush a critical segment of our country’s economy, increase reliance on foreign energy, and weaken our national security. I call on the Biden administration to support responsible energy development on our public lands.”

Sen. John Hoeven, R-North Dakota, said the action will have many negative side effects for consumers as well as the energy industry.

“The moratorium placed on new federal oil and gas permits harms our ability to produce energy domestically, especially in western states like North Dakota, where there is a significant presence of federal land,” he said. “This kind of heavy-handed regulatory approach raises prices for consumers, increases our reliance on foreign oil and undermines the environmental goals of this administration as it prevents the construction of the infrastructure needed to capture natural gas and prevent flaring. Instead of increasing our dependence on countries with less stringent environmental standards, we should be producing more energy at home with better environmental stewardship. To this end, we will continue working to advance regulatory relief and new innovative technologies.”

Sen. Jon Tester said the suspension won’t affect existing work, and that Montanans have a right to expect fair rates of return on public minerals.

“I will keep working to ensure that as we lease them, we’re getting a fair return for taxpayers and not impacting any current development or jobs,” he said. “The Biden Administration has made clear this review will not impact any existing work, and I will hold them accountable to that promise so we protect Montana jobs.”

Nationally, industry groups were also critical. American Petroleum Institute said that Biden’s move is really an “import more oil” policy, one that will ultimately cost nearly 1 million American jobs, along with increasing carbon dioxide emissions and reducing revenue that funds education and key conservation programs.

“Energy demand will continue to rise, especially as the economy recovers, and we can choose to produce that energy here in the United States, or rely on foreign countries hostile to American interests,” API President and CEO Mike Sommers said. “With this move, the administration is leading us toward more reliance on foreign energy from countries with lower environmental standards and risks to hundreds of thousands of jobs and billions in government revenue for education and conservation programs. We stand ready to engage with the Biden administration on ways to address America’s energy challenges, but impeding American energy will only serve to hurt local communities and hamper America’s economic recovery.”

Environmentalists, meanwhile, praised the action, and a coalition of them filed suit to overturn the Trump administration’s sale of more than 1 million acres of public lands in the American West for fracking.

“While the Trump administration attempted to illegally cede our public lands and climate to the oil and gas industry and recklessly ignore climate science, we’ve been there to challenge them in court at every step of the way,” said Shiloh Hernandez, Staff Attorney for the Western Environmental Law Center. “The time has come for BLM to take stock of the monumental danger caused by its entire oil and gas program.”