Biden administration stops half-million-acre Wyo oil and gas sale

President Joe Biden’s Jan. 27 order to pause oil and gas leasing on federal lands hit Wyoming on Friday as the BLM postponed the auction of 383 parcels covering almost half a million acres.

The leasing pause will enable a review that’s part of an all-government fight against “a profound climate crisis” exacerbated by the burning of fossil fuels, Biden’s order states. The BLM had scheduled the first-quarter 2021 sale of development rights on 476,506 acres for March 15 after deciding the sale would not “significantly affect the rate of change” in the environment. The agency did not say when a lease sale might be rescheduled.

The BLM’s first quarter sale last year brought in $3.4 million after energy companies leased 75 parcels covering 71,689 acres. Wyoming received about half the sale’s proceeds and will also get a share of future production royalties, if production ever occurs. The auction last year sold less than a sixth of the acreage that had been proposed for sale this March.

Wyoming lawmakers last year, reacting to Biden campaign positions that threatened leasing, funded a report that says Wyoming would lose $304 million in annual tax revenue if leasing stopped on federal lands. That report has been much-touted in the wake of the official pause. But a critic who reviewed the report for The Wilderness Society says it overestimates impacts by up to 85%.

The state-commissioned drilling-ban impact report by a University of Wyoming energy economics professor predicts production and investment losses in Wyoming, plus the lost tax revenue, would amount to $640 billion through 2040. Author Tim Considine prepared the 66-page review in December more than a month before Biden paused leasing for “a comprehensive review” of the nationwide system.

Wyoming would lose 15,269 jobs a year in the first five years of a leasing moratorium, Considine wrote. Leasing or drilling restrictions also could have a “spillover effect,” potentially making extraction less attractive or efficient on nearby private or state lands, the paper says. 

Considine included numerous caveats about the difficulty of forecasting revenues. Critic Laura Zachary, an economic and policy analyst, wrote that Considine’s findings “quickly unravel when we take a look at a number of highly flawed assumptions.”

The Wyoming study “has a number of weaknesses that exaggerate the economic impacts … by between an estimated 70-85%,” she wrote in a report for The Wilderness Society. Methods Considine used to arrive at his conclusions, her critique reads, are “simply not how markets work in reality.”

Competing narratives

Conservationists say a leasing pause shouldn’t affect energy companies because they hold many leases that have yet to be developed. The Bureau of Land Management lists 13,296 leases in effect in the state in FY 2019. They covered 8.9 million acres, about 14% of the 62-million acres in Wyoming.

Agency statistics show that 4.1 million acres of leases in Wyoming were producing that year. But more than 5 million leased acres in the state are not producing, the group Rocky Mountain Wild said in an analysis.

“Th[e] results of this analysis show that the oil and gas industry currently has millions of acres of leases where they can continue operations during this pause,” wrote Alison Gallensky, a GIS cartographer with the Colorado environmental nonprofit.

The lease sales themselves account for a small portion of revenues the oil and gas industry provides to the state, said Dan Smitherman, the Wyoming State Manager for The Wilderness Society. “Over 90% of the revenue Wyoming reaps from federal oil and gas come from royalties paid on production — which will not be impacted by pausing new leasing,” he wrote in a statement. “Operators have plenty of opportunity to continue producing oil and gas during this pause.”

Producers “would indeed drill their existing leases if permitted,” Considine wrote in an email. “They just would be drilling fewer wells because there are no longer new leases being sold.

“Drilling responds to new leases with a lag as well as prices and market conditions,” he wrote. “I found that the average term of leases is five years. So after five years the bank of leases is depleted and there are no leases available to drill.”

While Considine’s paper considers impacts from a leasing moratorium and also from a drilling ban, myriad other forces are at play, conservationists say. Shifting customer preferences, new technologies, growing renewable energy sources and pandemic-induced slumps all have affected the fossil-fuel industry and Wyoming’s dependence on it.

In 2020 Wyoming issued 3,891 permits to drill, just 12% of the 31,529 issued in 2019, according to BLM statistics. The numbers have been on a roller-coaster ride over the last five years, from a low of 2,321 in 2016 to 2019’s high.

Now, government policies, in addition to market forces, may also directly restrict the sector.

A 2018 report found that Wyoming was the largest single contributor of greenhouse gasses from fossil fuels extracted from federal lands.

The estimates for the decade between 2005-2014, a period before coal companies saw significant loss of demand, showed that fossil fuels extracted from Wyoming were responsible for 57% of greenhouse gasses emitted from oil, gas and coal mined from federal lands nationwide.

Biden’s administration oversees federal lands that cover almost half of the state, leaving Wyoming’s drill-rig and dragline economy vulnerable to shifts in federal policy.

The cost of cleanup

Ceasing leasing on federal lands won’t solve the greenhouse gas problem, Considine wrote. The cost of avoided CO2 emissions under a lease moratorium is at least $58 a ton, he wrote. The price paid under an emission-reduction program in California, however, is only $15 a ton, his paper says.

“[R]estricting development of oil and gas on federal lands,” Considine wrote, “is a very expensive way to reduce greenhouse gas emissions.”

Comparing the cost of avoided CO2 emissions to the price California pays is inappropriate, Zachary rebutted. The “societal cost” of carbon — costs that aren’t easily quantified in monetary terms — is about $50 a ton, her criticism reads. Methane emissions, another gas- and oilfield pollutant, cost society as much as $1,500 a ton and that doesn’t include impacts to neighbors’ health, she wrote.

Gov. Mark Gordon and industry representatives embraced Considine’s report, with Gordon calling a potential ban “a serious threat to our state’s economy.” The Petroleum Association of Wyoming suggested Considine’s work was “the most accurate and up to date data.”

U.S. Sen John Barrasso (R-Wyoming) has offered a budget amendment that would establish a fund supporting schools in states with revenue lost from a leasing ban. U.S. Rep Liz Cheney (R-Wyoming) and U.S. Sen. Cynthia Lummis (R-Wyoming) introduced bills seeking to stop Biden’s leasing changes.

While Biden’s green campaign permeates the entire federal government, Gordon’s resistance is similarly widespread. He instructed state agencies to examine the financial impacts of what he called a “ban on leasing” and its effect on employment. He also asked agencies to coordinate with his office on ways to challenge the Biden order and identify opportunities for litigation.

Wyoming Game and Fish Department quickly responded. But while Considine said a leasing ban on federal lands could curtail development on private and state lands, the wildlife agency sees things differently.

A leasing ban “may force development to focus on undisturbed lands including those under state or private ownership,” Brian Nesvik, Director of Game and Fish, said in a statement. “A blanket ban on new sales of federal oil and gas leases decreases proponents’ ability to mitigate wildlife impacts because it restricts potential development locations,” his statement reads.

Game and Fish’s embrace of industry for the benefit of wildlife stretches credulity, said Jill Morrison, executive director of the Powder River Basin Resource Council. “It’s difficult to understand how the Game and Fish or any wildlife agency could think a leasing pause is a problem for managing wildlife,” she said.

“A leasing pause, especially when we have so many acres — millions —  already leased, isn’t going to have a detrimental impact at this point,” she said.

Biden’s review could result in higher royalty rates on federal leases, Morrison said. In some cases, those federal fees are half of what companies pay to private owners of fossil fuels, she said.

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“The state could stand to gain a lot more money,” Morrison said. Instead, it’s undertaking “desperate measures to cling to an outdated economy.

“We’re missing out on an opportunity because we’re in a state of denial,” she said.