The Energy 202: Trump administration continues oil and gas leasing during price drop and coronavirus pandemic
The Trump administration is moving full-steam ahead to allow more drilling for oil and natural gas on public lands — despite the precipitous drop in petroleum prices now undercutting their value.
The coronavirus pandemic has triggered one of the steepest slides in oil prices in history, with the U.S. energy sector being hit both by an expected surge in production from Saudi Arabia and Russia and a drop in global demand for fuel as airlines cancel flights and factories suspend production in an effort to contain the spread of the novel coronavirus.
Yet the viral pandemic is not stopping the Trump administration from selling off the right to drill for more oil and gas while prices remain so low, meaning the government is unlikely to reap the highest market price available for such public assets.
- The Trump administration went ahead last week with a long-planned offshore sale offering 78 million acres in the Gulf of Mexico. The government raised $93 million by selling the right to drill nearly 400,000 offshore acres — the least amount of money raised in a Gulf sale since 2016. Because of the virus, the lease sale was live-streamed from the New Orleans office of the Bureau of Ocean Energy Management, which oversaw the auction.
- Meanwhile, the Bureau of Land Management, which oversees onshore oil and gas drilling on public lands, has given no indication it will curtail and cancel a series of upcoming auctions in Colorado, Montana, Nevada, New Mexico, Utah, Wyoming and the Dakotas over the next three months.
- Also last week, the agency took in over 230 lease nominations covering more than 150,000 acres across southern Utah, including in parcels near Arches and Canyonlands National Parks.
The upheaval in oil markets and the spread of the virus has led to calls to postpone oil and gas auctions from around 90 conservation groups, including the Defenders of Wildlife and Friends of the Earth, which penned a March 19 letter to Interior Secretary David Bernhardt urging the government suspend upcoming lease sales.
Randi Spivak, the public lands program director for the Center for Biological Diversity said that sales at this point are giving taxpayers a raw deal. “The Trump administration is allowing speculators to lease public land for pennies,” she said.
But Conner Swanson, a spokesman for the Interior Department, said that all lease sales “are being evaluated on a case-by-case basis” in light of the virus, adding it is “unfortunate that these interest groups are playing politics at a time when all Americans need to come together.”
Kathleen Sgamma, head of the oil industry group Western Energy Alliance, emphasized that developing federal lands for oil is “a multiyear process” — meaning that parcels leased today will only start producing years from now when the price per barrel may look very different. “The environmental lobby is certainly not letting this crisis go to waste,” she added.
Yet it’s unclear when the price of oil will pick back up, with the world teetering on the edge of recession and the price war between the Saudis and Russians showing few signs of abating soon. Brent crude oil, the international price benchmark, fell from $66 at the start of the year to less than $27 on Friday. And the oil glut could grow to between 800 million and 1.3 billion barrels in the first half of the year, according to analysts at IHS Markit.
In the meantime, it’s U.S. shale producers that are expected to hurt the most from the global oil glut — leading the White House to weigh coming to their rescue with federal financing for debt-saddled oil and gas firms facing potential bankruptcy.
Treasury Secretary Steven Mnuchin has already signaled the administration would spend as much as $20 billion to fill the nation’s Strategic Petroleum Reserve and help keep domestic oil businesses afloat.
— U.S. oil workers are already paying the price: “Oilfield services firms have this week been the first companies to feel the hit from the sharp drop in the price of petroleum,” Brittney Martin and Will Englund report. “While the producers have announced spending cutbacks from 30 to 50 percent for the rest of this year, the outfits that do the actual work in the field are cutting hours, cutting pay and laying off workers.”
- Texas is being hit particularly hard: “Tens of thousands of Texans are being laid off across the state in places like the Permian Basin shale fields in West Texas as companies shut down their drilling rigs, according to Ryan Sitton, a state oil and gas regulator,” Bloomberg News reports.
- State regulators weigh response: The Texas Railroad Commission, which regulates the state’s oil and gas sector, is considering “whether to curtail crude production for the first time in decades” due to the price crash, according to the Wall Street Journal.
— Advocates want a greener stimulus: Environmental groups, climate scientists and solar, wind and battery industries are urging lawmakers to consider the stimulus package meant to address the pandemic-fueled economic decline as an opportunity to boost clean energy. The Senate on Sunday fell short of the votes needed to advance the bill.
- What they want: They are pushing for a combination of “direct spending, new tax credits for renewable energy, electric vehicles or appliances, and tough conditions for reviving fossil fuel firms or fuel-gobbling airlines,” Brady Dennis and Steven Mufson report.
- To quote: “During this emergency, specific attention should be paid to the emergent, yet vulnerable, clean energy industry,” Michael Brune, the executive director of the Sierra Club, wrote in a recent letter to lawmakers. “The clean energy industry faces the same stresses as the travel, restaurant, sports, and entertainment industries, with a new reality of forced closures and layoffs.”
- The measure in question: “Congress and the White House are looking at a draft $1.8 trillion package that contains cash payments to individuals, loans to small businesses, a $50 billion rescue program for sputtering airlines and $17 billion for firms linked to national security,” they write.
— Daily life has stalled amid outbreak — and that means less traffic and lower pollution: In Los Angeles, rush hour has basically vanished. In Seattle, which had one of the country’s earliest outbreaks, air pollution has dropped markedly. “A satellite that detects emissions in the atmosphere linked to cars and trucks shows huge declines in pollution over major metropolitan areas,” the New York Times reports.
- The big picture: While the dearth of traffic in California, for example, is “a sign that people are heeding the advice of public health experts, it’s yet another warning that the nation’s economy is facing serious peril. Traffic and congestion, while often a source of annoyance, are also a telltale sign of bustling economic activity.”
- But pollution can bounce back: Air pollution is expected to return once people resume outdoor activity and “studies have found that long-term exposure to air pollution tends to have a larger impact on public health,” per the report.
- History has long-term lessons: The decline in greenhouse gas emissions is probably temporary. “Experts are predicting the health crisis will cause global emissions to drop for the first time since 2009, during the Great Recession,” the Los Angeles Times reports. “But a look back over the decades shows a steady rise in greenhouse gases punctuated by temporary dips caused by economic downturns, including the 2008 global financial crisis and the oil shocks of the 1970s. Pollution bounces back predictably once the economy starts improving again.”
— Energy Department backs supercomputer initiative to fight coronavirus: “The new effort is led by IBM with the backing of computer scientists from leading universities, tech giants including Amazon and Google, and the country’s national research labs,” Tony Romm reports. “By pooling critical computing power that can perform complex calculations many magnitudes quicker than average consumer-facing devices, epidemiologists and other health experts can ‘discover new treatments and vaccines,’ Trump said at a news conference.” (Amazon chief executive Jeff Bezos owns The Post.)
— What happens when natural disasters strike during a pandemic? A whole new set of concerns. If disaster victims pile into shelters, those, too, could become ripe for an outbreak. “The virus is forcing emergency managers to rethink long-held procedures for operating shelters like these in real time. That challenge comes as the nation’s crisis-response work force is already taxed by three years of brutal hurricanes, floods and wildfires, a trend that climate change promises to accelerate,” the New York Times reports.
- Put in the practice now …: Federal Emergency Management Agency workers are practicing social distancing and limiting the number of victims in field offices. The American Red Cross is preparing to have cots spaced out, and implementing new guidelines for screening and isolating people in shelters.
- …because disasters are ahead: The National Oceanic and Atmospheric Administration released a report late last week predicting widespread flooding in 23 states. Meanwhile, “California has already been hit by nine wildfires this year; the National Interagency Fire Center reported 11 new large fires around the country this week alone.”
- But: The agency itself indicates it’s below a 2017 target for personnel, Bloomberg News reports. “FEMA is stretched,” James Kendra, who directs the Disaster Research Center at the University of Delaware, told the publication. “All the other hazards we have in the U.S. will not go away and will only complicate the task of responding to the coronavirus.”
- FEMA head wouldn’t disclose mask distribution specifics: Administrator Peter Gaynor said in Sunday show interviews that masks for health-care workers treating coronavirus victims are being shipped across the country.
- But when CNN’s Jake Tapper asked for an estimate of how many the administration acquired and the number distributed, Gaynor responded: “I can’t give you a rough number. I can tell you that it’s happening every day. And my mission is operational coordination of all of these things. And that’s my focus.”
“I can’t give you a rough number,” FEMA administrator Pete Gaynor says about the number of medical masks the federal government has acquired to send to hospitals in dire need of them as supplies dwindle amid the coronavirus pandemic. https://t.co/oMcZ23xL75 #CNNSOTU pic.twitter.com/SMbJndEGk9
— State of the Union (@CNNSotu) March 22, 2020
— What to do about all the “social distancing” at national parks: The Trump administration shuttered some national parks over fears of the coronavirus spreading. Then, Interior Secretary David Bernhardt said the administration was waiving fees at some parks to “it a little easier for the American public to enjoy the outdoors in our incredible national parks” at a time when indoor gatherings have been restricted.
- The problem: The administration’s moves have raised questions about crowding for workers and park visitors at a time when public-health experts warn Americans to remain six feet apart and not to gather in groups of more than 10 people, The Post’s Darryl Fears reports.
- In Washington: The National Park Service and local police are trying to limit access to the famed cherry blossoms on the Mall and announced street closures on Sunday.
— Don’t crowd the Tidal Basin. Find a more secluded place to see cherry blossoms around Washington while on a social distancing walk. “Out of almost 200,000 street and city park trees that are catalogued by the DDOT Urban Forestry Division, just shy of 9,000 are cherry blossom trees. According to the database, there are about 1,850 of the famed Yoshino cherry trees, plus many other varieties to enjoy,” Ian Livingston writes.