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October 06, 2022

Gulf Energy Alliance Comments on U.S. Department of Interior, Bureau of Ocean Management’s Proposed 2023–2028 National OCS Oil and Gas Leasing Program and Draft Programmatic Environmental Impact Statement

Ms. Kelly Hammerle
Chief
National OCS Oil and Gas Leasing Program Development and Coordination Branch
Leasing Division
Office of Strategic Resources
Bureau of Ocean Energy Management (VAM–LD)
45600 Woodland Road
Sterling, VA 20166

Re: Gulf Energy Alliance (GEA) Comments on U.S. Department of Interior (Interior), Bureau of Ocean Management’s (BOEM) Proposed 2023–2028 National OCS Oil and Gas Leasing Program (Program) and Draft Programmatic Environmental Impact Statement (EIS) (Docket ID: BOEM–2022–0031)

Ms. Hammerle,

I am writing on behalf of the Gulf Energy Alliance (GEA) in response to the U.S. Department of Interior (Interior), Bureau of Ocean Management’s (BOEM) Proposed 2023–2028 National OCS Oil and Gas Leasing Program (Program) and Draft Programmatic Environmental Impact Statement (EIS). Specifically, the GEA urges BOEM to preserve all of the lease sales identified in the Proposed Program and not further restrict access to future energy resource development in the U.S. Gulf of Mexico (the Gulf) or elsewhere. Oil and natural gas produced in the Gulf is vital to providing a stable economy for all Americans, is the least carbon-intensive production in the world and should be a keystone of U.S. energy strategy in the face of growing threats to our energy and national security.

The GEA is a coalition of leading independent offshore oil and natural gas producers whose operations are almost exclusively focused in the Gulf. Our mission is to support policies and regulations that encourage investment, innovation, and job creation for the offshore oil and gas industry. Independent offshore producers are not the household names with which you may be familiar, and we have distinctly different business models than the major oil and gas companies. Collectively, we contribute significantly to U.S. offshore oil and natural gas production. In 2019, independent oil and gas companies produced approximately 47% of the total Outer Continental Shelf oil and natural gas production and provided 53% of the total offshore revenues paid to the U.S. Treasury. With a strong focus on the safety of our employees and contractors, offshore producers support hundreds of thousands of jobs across a vast and nationwide supply chain.

We urge the BOEM to take the following actions: (1) finalize the Proposed Program with all proposed lease sales intact and to conduct new offshore oil and gas lease sales as quickly as possible; (2) maximize the number of lease sales in the Gulf at no less than two a year, for a total of 10 in five years; (3) ensure these lease sales are continuous; and (4) acknowledge its own data from both the Biden and Obama Administrations about the economic and environmental benefits of oil and gas production in the Gulf.

1. BOEM Must Hold Lease Sales in the U.S. Gulf.

BOEM is seeking feedback on whether it should hold lease sales at all. It is frankly alarming that BOEM would even consider this a possibility at this time for the following four main reasons.

First, extending the de facto pause that is currently in place (notwithstanding those lease sales required to occur as mandated by the Inflation Reduction Act, Pub. L. 117-169) jeopardizes national security. The Biden Administration’s release of millions of barrels from the Strategic Petroleum Reserve, constant and dishonest allegations of price-gouging, and continued courtship of hostile foreign actors to increase their own production, has destabilized domestic oil and gas production, with potential far-reaching long-term ramifications. The United States needs predictable and reliable offshore oil and gas lease sales to promote energy and national security, which, as recent geopolitical events remind us, will continue to be one and the same.

The Energy Information Agency (EIA) projects oil and gas will continue to be the most consumed sources of energy through 2050.1 Meeting the demand for reliable and affordable energy while at the same time supporting the transition to a lower carbon future is the challenge of our time. The Biden Administration will be remiss if it continues to turn a blind eye to the hard truth – we need domestically-sourced oil and natural gas.

Second, the Biden Administration’s proposal to continue the de facto ban on the federal offshore oil and natural gas leasing program will continue to harm Americans already facing increased costs due to inflationary pressures. Americans should not continue to be subjected to the whims of foreign dictators in energy markets when a key part of the solution is right in our backyard. Since the first day President Biden took office—and long before Russia invaded Ukraine—the price of oil and gas steadily increased. According to data from the EIA, the price of WTI was $53.40 per barrel on Inauguration Day in 2021.2 On February 24, 2022, the first day Russia invaded Ukraine, the price of WTI was $99.66—an 87% increase.3 This increase cannot be attributed to Vladimir Putin. Jumping ahead to June 10, 2022, the American Petroleum Institute (API) reported that the price of gasoline hit an all-time high of more than $5 per gallon in every single state in the country.4 If this trend has taught us anything, it is that without domestic oil and gas production, Americans are at the mercy of hostile foreign actors.

Third, extending the temporary “pause” or having erratically timed lease sales, will force capital providers to seriously rethink their long‐term commitment to the Gulf. This will result in capital flight to other areas of the world where the oil and natural gas supply will be produced to meet world demand. By ending lease sales in the Gulf, the U.S. will lose out on billions of dollars of economic activity and taxes, in addition to good-paying jobs

Finally, ending lease sales in the Gulf will not have any impact on global demand or supply. It will just mean increased production in other areas of the world under much lower environmental standards. The Obama Administration shared this view, concluding in a 2016 report by BOEM that “[e]missions from substitutions are higher due to the exploration, development, production, and transportation of oil from international sources being more carbon intensive.”5 The Biden Administration echoed this same truth in its Proposed Program for 2023-2028. BOEM’s own analysis states, “The deepwater GOM’s strong competitiveness in terms of GHG intensity is due to a number of factors, including restrictions on venting and flaring of natural gas on the OCS; the medium, less dense crude oil that is prevalent in the area; and the fact that recent OCS leasing activity has been focused on the deepwater GOM, meaning that leases in that area are earlier in their life cycle.”6 A no lease sale option will simply mean higher worldwide greenhouse gas emissions.

2. BOEM Must Hold Continuous Lease Sales in the U.S. Gulf

Finding new oil and gas is a highly prospective venture. Whether companies are looking for new discoveries or want to incorporate new lease blocks into existing projects, offshore producers require new acreage to ensure continued production. To obtain acreage, offshore oil and gas producers need regularly scheduled lease sales.

Furthermore, it can take more than a decade before oil and gas leases can even begin production. The Biden Administration’s narrative that the majority of current leases in the GOM are inactive or are being “stockpiled” is a serious misconception, at best.

Every offshore lease awarded under the Outer Continental Shelf Lands Act (OCSLA)7 forms a contract between the government and the lease holder which grants lessees the right to evaluate the potential for production of commercial quantities of oil and natural gas. As part of this process, offshore oil and gas producers pay hundreds of thousands to millions of dollars to participate in a competitive bidding process simply to acquire a lease. Following this, offshore oil and gas producers continue to spend hundreds of millions, if not billions of dollars, over a period of 10 years or more to bring a lease into production.

In no way is a lease “inactive” during this exploration and development phase. This process includes years of conducting due diligence and obtaining rigorous scientific and economic analyses required to determine whether a lease contains commercial quantities of oil and natural gas. This includes reprocessing or shooting new seismic data, analyzing the seismic data to understand the geology and reservoir characteristics, running economic models, resizing reserve estimates, and seeking permit approvals. This process is highly regulated, and the development plan approval involves at least fifteen major permits that must meet more than ninety federal regulations. Industry is not “sitting” on these leases. On the contrary, GEA members are actively investing in and working toward increasing domestic oil and gas production and paying rentals to the government all the while until either deciding the lease is uneconomic, expiration of the lease terms, or bringing it into production.

3. BOEM Must Acknowledge its Own Data that Oil and Gas Produced in the U.S. Gulf is the Most Environmentally Friendly Oil and Gas in the World.

The Biden Administration’s consideration to potentially not hold lease sales undermines its very own climate goals. As the Russian invasion of Ukraine has made clear, not all barrels of oil are created equally. The question we must answer is whether we will meet demand for fossil fuels with “good barrels” or “bad barrels.”8 The good news is that the best barrels in the world are produced right here in the U.S. Gulf.

Oil and natural gas produced in the Gulf is a lower carbon alternative to oil produced by foreign, higher emitting producers like Russia, Venezuela, and Iran, and the benefits that flow from U.S. Gulf production are vast. Beyond the obvious national security and energy accessibility and affordability benefits, oil production in the U.S. Gulf has among the lowest greenhouse gas emissions intensity in the world, with approximately half the carbon intensity of other producing regions while also outperforming the rest of the world in methane emissions.9 This will only continue to improve as the industry uses existing infrastructure to produce hydrocarbons in increasingly efficient ways. BOEM’s own analysis supports this position. The Proposed Program for 2023-2028 states, “available data suggest[s] that deepwater (200 meters or greater) GOM production and the United States onshore tight (also known as shale or unconventional) oil production generally have low GHG intensity profiles relative to oil produced elsewhere…. The data sources indicate that heavy oil production (such as in Canada or Venezuela) has by far the highest GHG intensity, followed by conventional onshore oil production.”10

Thus, while the Gulf accounts for 17% of U.S. oil production, methane emissions account for only 2.95% of nationwide energy production emissions. This is because, unlike international practices, offshore operations in the U.S. GOM have been more stringently regulated for more than 70 years. Venting and flaring is extremely limited and heavily regulated in offshore operations and offshore operations are using leading-edge technology for gas detection, methane capture, and reduced emissions. If the Biden Administration is serious about decreasing emissions on a larger scale, it should no longer force Americans to purchase oil and gas from foreign countries where higher emissions are being emitted into the atmosphere.

In conclusion, BOEM must hold lease sales in the Gulf on a consistent and predictable basis. Future lease sales will allow GEA members to continue creating good paying jobs, advance the Biden Administration’s goals of reducing global greenhouse gas emissions, prevent Americans from being subjected to the whims of foreign dictators by no longer empowering our adversaries, and ensure American energy security so that we do not once again find ourselves in the situation we are currently in—rising energy costs prices and depleted domestic oil and natural gas reserves due in large part to our continued reliance on hostile foreign actors.

Thank you for taking time to consider the position of GEA members. We look forward to working with BOEM to produce oil and natural gas safely and responsibly in the U.S. Gulf of Mexico. Please do not hesitate to reach out if you have any questions.

Sincerely,

Kevin Bruce
Executive Director
Gulf Energy Alliance

1 Annual Energy Outlook 2022 (AEO2022) (eia.gov)

2 U.S. Energy Information Administration, “Short-Term Energy Outlook” (March 2022), https://view.officeapps.live.com/op/view.aspx?src=https%3A%2F%2Fwww.eia.gov%2Foutlooks%2Fsteo%2Frealpr ices%2Freal_prices.xlsx&wdOrigin=BROWSELINK.

3 Ibid.

4 CNBC, Gasoline prices top $5 a gallon nationally for the first time and are likely headed higher (Jun. 11, 2022), available at https://www.cnbc.com/2022/06/11/gasoline-prices-top-5-a-gallon-nationally-for-the-first-time-and-are- likely-headed-higher.html.

5 See “OCS Oil and Natural Gas: Potential Lifecycle Greenhouse Gas Emissions and Social Cost of Carbon,” Bureau of Ocean Energy Management, Department of Interior (November 2016) p. 36,
https://www.boem.gov/sites/default/files/oil‐and‐gas‐energy‐program/Leasing/Five‐Year‐Program/2017‐2022/OCS‐ Report‐BOEM‐2016‐065‐‐‐OCS‐Oil‐and‐Natural‐Gas‐‐‐Potential‐Lifecycle‐GHG‐Emissions‐and‐Social‐Cost‐of‐ Carbon.pdf.

6 U.S. Dep’t of Interior, Proposed 2023-2028 National Outer Continental Shelf Oil and Gas Leasing Program and the Draft Programmatic EnvironmentalImpactStatementforthe2023–2028Program,P.5-37, https://www.boem.gov/sites/default/files/documents/oil-gas-energy/national-program/2023- 2028_Proposed%20Program_July2022.pdf.

7 43 U.S.C. §§ 1331 et seq.

8 Murti, Arjun. “We Need More Good Barrels and Fewer Bad Barrels.” Super-Spiked, 12 Mar. 2022, https://arjunmurti.substack.com/p/we-need-more-good-barrels-and-fewer?s=r.

9 “Carbon Emissions performance in US GOM: a low emitter in the crossfire,” Wood Mackenzie Insight (Feb. 2021), p. 3; see also “Year 2017 Emissions Inventory Study”, OCS Study BOEM 2019-072 (October 2019) https://espis.boem.gov/final%20reports/BOEM_2019-072.pdf.

10 Supra note 4 at P. 5-36.

ADDITIONAL ARTICLES

June 28, 2023

GEA Comments on the Proposed Financial Assurance Rule.

March 09, 2023

The GEA Applauds the House Natural Resources Committee for Bringing Forward Much-Needed Permitting Reforms and Mandated Offshore Lease Sales in the TAPP Act

October 06, 2022

Gulf Energy Alliance Comments on U.S. Department of Interior, Bureau of Ocean Management’s Proposed 2023–2028 National OCS Oil and Gas Leasing Program and Draft Programmatic Environmental Impact Statement

March 22, 2022

Written Statement of Kevin Bruce, Executive Director Gulf Energy Alliance

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