By Jennifer Hiller and Nichola Groom
(Reuters) – US President Joe Biden’s promised ban on new oil and gas drilling on federal land would take years to halt production of major shale drills because they already have licenses stored, according to Reuters interviews with executives.
But smaller independent oil explorers, without the resources of large corporations, were more concerned with Biden’s promise to tighten regulations and stop issuing new licenses on federal land, part of his broad plan to combat climate change and lead to zero net emissions savings by 2050.
Federal land is the source of about 10% of the United States’ oil and gas supply. Fossil fuels produced on land and waters administered by the federal government contribute to almost 25% of US greenhouse gas emissions, according to government estimates, making them an easy target for the government’s climate agenda.
Biden’s pledge would reverse former President Donald Trump’s efforts to maximize drilling and mining on federal properties. But it will not end production in these areas overnight.
The seven companies that control half of the federal land supply in the 48 Lower Lower states have leases and permits in hand that can last for years.
“We have always been very confident that we will continue to develop and drill in federal areas,” said David Hager, executive president of Devon Energy Corp, the largest oil producer on federal land in the 48 states of the Lower 48. “It is built into the rights that we have leases and we are doing it the right way. “
He said he expects the company’s federal land licenses to last at least four years.
Other major producers on federal land include EOG Resources Inc, ExxonMobil Corp, Occidental Petroleum Corp, ConocoPhillips and Mewbourne Oil Company.
Representatives of these companies did not speak out for this article. But several have issued public statements saying they have solid federal license stocks and an ability to meet the stricter emissions regulations expected under Biden. They also said they could move drilling quickly to state or private areas once federal licenses run out.
EOG said it has at least four years of federal licenses. “When it comes to access to federal land, this is one of the things that we are not really concerned with in our business. We have a lot of potential outside federal land as well,” said COO Billy Helms during an investor conference last year.
Occidental said last year that it had well over 200 federal drilling licenses on hand and requested about 200 more in areas of New Mexico, where some of the richest reserves are below federal properties.
Ameredev II, which produces about 10,000 barrels of oil per day in Permian, New Mexico, also has federal drilling licenses to last at least four years.
“We are trying to maximize our value over an uncertain range of possibilities,” said CEO Parker Reese.
Energy consultancy Rystad said it saw the storage of federal land-drilling licenses in the run for the November presidential election, with federal license applications increasing to a 31% share of all license applications in major US oil fields. 18% USA in 2019.
Biden’s team did not respond to several requests for comment and it was unclear when his government could take steps to ban drilling.
Most federal onshore drilling takes place in western states like New Mexico, Colorado and Wyoming, which receive a portion of the extraction royalties and depend on that revenue.
With Biden’s ownership, the U.S. shale drilling industry has already fallen dramatically due to weak prices.
Total U.S. shale production is expected to drop to 7.5 million barrels a day in February, the U.S. 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 over 2021, as producers control spending.
‘EXISTENTIAL THREAT’
Much of the industry is made up of smaller firms that lack the resources to obtain licenses, get a boost in installing new emission control technologies, or take their business elsewhere.
“The impact on the independent oil tanker 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 per day on federal land, mainly in Wyoming, New Mexico and North Dakota.
Law called Biden’s promised policy “an existential threat” unlike any he has encountered in 40 years in the oil business, echoing the rhetoric used by some climate activists about the threat posed by global warming.
Many smaller drilling companies operate in a single state or basin, according to the Western Energy Alliance trade group, and would have difficulty packing and leaving.
“Actually, I live here,” said Mark Murphy, a third generation tanker from New Mexico. His company, Strata Production Co, has 15 employees and operates 47 wells, most in federal areas.
WEA, the oil and gas industry’s trade group most focused on public land policies, has pledged to fight any efforts to impose a lease ban in court. States that rely heavily on federal oil and gas revenues are also raising opposition.
Last month, Wyoming officials released a study that said the ban would cost eight western states $ 8.1 billion in tax revenue and $ 34.1 billion in investments over the next five years. State Governor Mark Gordon called the predictions “devastating”.
New Mexico’s democratic governor, Michelle Lujan Grisham, said in late 2019 that she would seek exemption from any drilling ban imposed by a future government. But she has not discussed the matter publicly since, and her office has not responded to several requests for comment.
(Reporting by Jennifer Hiller and Nichola Groom; edited by Richard Valdmanis and David Gregorio)