New Oil Lease Ban Makes Good Market Sense

Letter To The EditorNew Oil Lease Ban Makes Good Market SenseThe sky is not falling for the oil and gas industry and there is neither a shortage of federal oil and gas leases nor a need for expanding production.

Originally published on February 2, 2021 in The Wall Street Journal

Regarding your editorial “Biden’s Fossil-Fuel Freeze” (Jan. 23): The federal leasing system has been a mess for a long time. Overproduction and a glut in global oil markets has driven prices down and bankruptcies up since 2015—long before the pandemic. In other words, there is no urgency to lease more federal land for drilling, a course the Trump administration blindly pursued. Most lease sales have one bidder, many none at all. Leases often sell for $2 per acre. Millions of leased acres sit idle and will probably never enter production. In the recent, highly contentious Arctic National Wildlife Refuge lease sale, the biggest bidder was the state of Alaska, and no major oil producers submitted bids at all.

Moreover, royalties from mineral development on federal land have been an important revenue stream for western states like New Mexico. Yet the same 12.5% royalty rate has applied since 1920s, while oil-rich states like Texas charge as much as 25% for drilling on state lands.

The sky is not falling for the oil and gas industry, and there is neither a shortage of federal oil and gas leases nor a need for expanding production.

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