By Jennifer Hiller and Nichola Groom
(Reuters) – US President Joe Biden’s promised ban on new oil and gas drilling in federal states will take years to shut down production of the best shale drills because they have already stored permits, according to Reuters interviews with executives.
But smaller independent oil drillers without the resources of large corporations were more concerned about Biden’s pledge to tighten regulations and stop issuing new permits to federal states, which was part of its comprehensive plan to combat climate change and the economy to bring to a net release by 2050.
Federal states are the source of about 10% of U.S. oil and gas supplies. Fossil fuels produced on federal lands and waters, according to government estimates, contribute nearly 25% of U.S. greenhouse gas emissions, making it an easy target for the government’s climate agenda.
Biden’s promise would reverse former President Donald Trump’s efforts to maximize drilling and mining on federal property. But it will not end production in those areas overnight.
The seven companies that control half of the federal supply in the lower 48 states have leases and permits in their hands that could last for years.
“We have always been very confident that we will continue to develop and drill federal surfaces,” said David Hager, executive chairman of Devon Energy Corp., the largest rural rural oil producer in the lower 48 states. “It’s embedded in the rights we have in the leases and we do it the right way.”
He said he expects the company’s federal permits to last at least four years.
Other top federal land producers include EOG Resources Inc, ExxonMobil Corp, Occidental Petroleum Corp, ConocoPhillips and Mewbourne Oil Company.
Representatives of these companies do not comment on this article. But several have issued public statements, saying they have a solid supply of federal permits and the ability to comply with stricter emissions regulations that Biden said are expected. They also said they could move the drilling to state or private land quickly once federal permits dried up.
EOG said he has had federal permits for at least four years. “As far as access to federal states is concerned, this is one of the things we do not really worry about. We also have a lot of potential outside of federal states,” Billy Helms, chief operating officer, said at an investor conference. last year.
Occidental said last year it had more than 200 federal drilling permits in its hands and he had applied for another 200 permits on the surface in New Mexico, where some of the richest reserves are located under federal property.
Ameredev II, which produces about 10,000 barrels of oil a day in Permian, New Mexico, also has federal drilling permits to last at least four years.
“We try to maximize our value against an uncertain range of possibilities,” said Parker Reese, chief executive.
Energy consultant Rystad said the inventory returns of federal lands are seen in the run-up to the presidential election in November, with federal permit requests rising to a 31% share of all permit requests in major U.S. oil fields from 18% in 2019.
Biden’s team did not respond to several requests for comment, and it was unclear when his government would respond to a drilling ban.
Most federal drilling on land takes place in Western states such as New Mexico, Colorado and Wyoming, which receive a portion of withdrawal money and are dependent on income.
As Biden takes office, the US shale drilling industry has already declined sharply due to weak prices.
Total US shale production is expected to drop to 7.5 million barrels per day in February, the US Department of Energy said on Tuesday, which would be the lowest since June 2020.
Shale drilling accounts for about two-thirds of U.S. crude oil production, but production is expected to decline during 2021 as producers limit spending.
‘EXISTING THREAT’
A large part of the industry consists of smaller businesses that do not have the deep pocket to evade permits, get started with installing new technologies to control emissions, or take their business elsewhere.
“The impact on the independent oilman is far greater than on Big Oil,” said Don Law, owner of Denver-based Prima Exploration Inc., which produces about half of its 1,000 barrels of oil a day in federal lands. , mainly in Wyoming, New Mexico and North Dakota.
Law calls Biden’s promised policy an ‘existential threat’, unlike what he has encountered in the oil industry for 40 years, and it reflects the rhetoric that some climate activists have used about the threat posed by global warming.
According to trading group Western Energy Alliance, many smaller drilling companies operate in a single state or come and struggle to pack up and leave.
“I actually live here,” said Mark Murphy, a third-generation oilman in New Mexico. His company, Strata Production Co., has 15 employees and operates 47 wells, mostly at the federal level.
WEA, the trade group for oil and gas industries that focuses most on public land policy, has vowed to fight any attempt to bring a rental ban into court. States that rely heavily on federal oil and gas drilling revenues are also increasing opposition.
Last month, Wyoming officials released a study stating that a ban would cost eight Western states $ 8.1 billion in tax revenue and $ 34.1 billion in investment over the next five years. State Gov. Mark Gordon called the predictions ‘devastating’.
The Democratic governor of New Mexico, Michelle Lujan Grisham, said in late 2019 that she would ask for a waiver of any drilling ban imposed by a future government. But she has not discussed the issue publicly since, and her office has not responded to several requests for comment.
(Edited by Jennifer Hiller and Nichola Groom; Edited by Richard Valdmanis and David Gregorio)