Axios
What Biden’s oil leasing moves mean for the production of the Permian Basin
Data: Kayrros, WellDatabase, Federal Reserve Bank of Dallas; Chart: The Will Chase / AxiosPresident Biden freeze on new federal land oil leases will halt production in the Permian Basin to a limited degree, but will also boost development from the New Mexico basin side to Texas, according to a new forecast from the Dallas Fed. Why it matters: It is an attempt to assess the impact of emerging federal policies on the country’s most prolific shale basin. Stay on top of the latest market trends and economic insights with Axios Markets. Subscribe for free The big picture: the recently imposed lease moratorium, combined with slower license approvals over the existing area, would reduce projected oil production compared to what would be expected without these policies. Check the “hybrid” above, which shows Permian production in 2025 at around 200,000 barrels per day less than the “benchmark” case. This is hardly anything, but not much compared to the millions of barrels a day produced in the Permian. They also modeled aggressive restrictions that prevent new drilling licenses on existing leases (“restrictive” above), which further reduces the projected recovery from the pandemic’s decline. Threat level: the restrictions have a much greater future effect in New Mexico, which produces much less than the Texas side, but is still an important source of revenue for the state. Half of the New Permian production in Mexico is on federal land, while in Texas production takes place on state and private land. Under the lease freeze combined with slower license approvals, New Mexico’s production in 2025 is 400,000 barrels per day less than in the reference case. “With an expected change in drilling in the federal area, employment crosses the state borders from New Mexico to Texas.” The intrigue: although the Biden government has frozen new federal land leases, it has not changed to end licensing on existing deals. Internal officials say a large number are still coming out the door, despite tighter scrutiny. Note: your analysis is based on the WTI at $ 50 per barrel, which is well below current levels, so production estimates should be considered conservative. Graphs: Visualizing the future of oil in New Mexico Data: Kayrros, WellDatabase, Federal Reserve Bank of Dallas; Chart: Will Chase / AxiosThis chart from the Dallas Fed analysis looks at the projected New Mexico Permian production under the lease freeze and hypothetical permission ban. By the numbers: In the fiscal year ended mid-2020, New Mexico received $ 2.6 billion in industry fees, royalties and taxes. More than $ 800 million came from the state’s cut in federal revenue, notes the analysis. In the event of a lease freeze, production continues to return from the decline of the pandemic this year, drops slightly in 2022 and then stabilizes and “preserves state royalties and tax revenues closer to current levels.” If licensing also ended , much more revenue would be at risk. More from Axios: sign up for the latest market trends with Axios Markets. Sign up for free