Editor’s note: Opinions expressed by the author are their own.

Heading into the Independence Day weekend, our nation passed two energy markers. First, June 30 marked the day upon which the 2017-2022 offshore oil and gas leasing program expired, putting an abrupt halt on U.S. offshore lease sales. Second, a day later, the Biden administration released the proposed program for the next program for offshore oil and gas leasing, projected to cover the 2023-2028 timeline and creating a striking gap in offshore lease sales. American energy policy is now in uncharted waters without a leasing program, and Americans will be worse off without the timely resumption of region-wide lease sales.

Hart Energy July 2022 - NOIA Op-ed Uncharted Waters Offshore Leasing Program - Erik Milito headshot
Erik G. Milito is president of the National Ocean Industries Association (NOIA). He previously served for 17 years at the American Petroleum Institute (API), as vice president of upstream and industry operations, covering regulatory, legislative and technical matters related to U.S. oil and natural gas exploration and production.

The proposed program is only the second of three lengthy steps required in the development of a new offshore oil and gas leasing program; Gulf of Mexico lease sales cannot resume without a final program absent legislative action from Congress. This is the first time that an administration has failed to publish a final—not merely a proposed—offshore leasing program before the expiration of the previous program.

Prior to this point, every administration—Republican and Democrat—has fulfilled its legal obligation to maintain a leasing program and hold lease sales. Every administration has recognized the critical strategic advantages of an uninterrupted U.S. oil and gas leasing program.

2022 will now be the first time the U.S. has not had an offshore oil and gas lease sale since 1965. For context, Lyndon Johnson was president, the Sound of Music topped the box office and Bonanza and Gomer Pyle were the most popular shows on television. This is atypical energy policy to say the least.

The administration actually held a Gulf of Mexico (GoM) lease sale in 2021 but it was nullified in a ruling by a federal judge in D.C. When deciding to move forward with the 2021 lease sale, the administration specifically determined, “The decision to hold Lease Sale 257 recognizes the role that GoM oil and gas resources play in addressing the Nation’s demand for domestic energy sources and fosters economic benefits, including employment, labor income, and tax revenues, which are highest in Gulf Coast States and also distributed widely across the United States.”

Unfortunately, the Administration decided to not defend this lease sale in litigation. Industry and the State of Louisiana have independently appealed the ruling.

The gravity of the situation could not be any clearer than what we are experiencing today with global energy markets. Energy prices are at record highs, Americans are suffering, and additional supplies are needed to meet demand and help alleviate inflationary impacts. Global leaders at the G-7 emphasized the lack of adequate additional capacity for global oil production.

Source: Energy and Industrial Advisory Partners

Potential Impacts of a Delayed 5-Year Leasing Program

Cause of Impact Potential Effect
Delay in issuing a new National OCS Oil and Gas Leasing Program for oil and natural gas development (5-Year Leasing Program) No new lease sales after lease sale 261 and until 2028
No lease sales between lease sale 261 (2021) and 2028  Immediate Reduction in Bid Revenue 
Leases expire and are not available for leasing  Continuous Reduction in Lease Revenue through 2028
A steady reduction in leases available for exploration through 2028 A steady reduction in exploration drilling and reserves discovered until leasing restarts
As leases expire, an increasing portion of the Gulf of Mexico is not open to activity A steady reduction in new projects
Long development timelines of large deepwater projects Reduced production throughout the forecast period
Project economics are impacted by an inability to lease nearby blocks to tie in new production A steady reduction in new projects
A steady reduction in new projects  Reduced and delayed larger projects reduce tie in opportunities for smaller projects
Reduced tie ins to existing facilities Reduced production at existing facilities decreases facility life spans
A reduced base of existing production Larger amounts of project development activity would be required to return the Gulf of Mexico to its previous production curve
Increased shut-ins of existing facilities Reduced operational spending, increased decommissioning spending
Operators will be less likely to allow leases to expire  A higher retention rate for existing leases

One thing is clear, we have the ability to produce additional oil from U.S. offshore waters. However, energy production requires lease sales, and the administration has been stubbornly shutting leasing down.

While Americans and our allies want President Biden to increase U.S. production, the inherent delays in the development of a leasing program mean that the multiyear gap in offshore oil and gas lease sales will only grow, as the next lease sale is not expected until 2023—and that may be optimistic considering the bureaucratic steps still required in the process.

The delay in the leasing program could reduce American energy production by an average 500,000 million bbl/d of oil. Furthermore, 60,000 high-paying and accessible jobs could disappear through a substantial gap in offshore oil and gas leasing.

The new Biden administration proposal averages two Gulf of Mexico lease sales per year. This follows the previous 2017-2022 leasing program—developed by the Obama administration—which also included two region-wide lease sales per year in the Gulf of Mexico. Multiple region-wide lease sales per year provide the necessary flexibility that companies need to adapt to rapidly changing market conditions and to pursue the most promising hydrocarbon prospects.

A lingering pause of Gulf of Mexico lease sales or sales with reduced acreage could deliver a substantial setback to emissions progress. The Gulf of Mexico is one of the lowest-carbon sources of oil in the world. Wood Mackenzie predicts, “restrictions on U.S. production in the Gulf could end up having a counterproductive impact on global emissions.” Tackling climate change is a global issue and removing a low-emitting region will only serve to hurt the collective global average.

Furthermore, the same companies that have built the Gulf of Mexico into a premier low-carbon basin are leading the energy transition. Reduced activity in the region, caused by the lack of new lease opportunities, will serve to limit investment dollars. As in any industry, investment dollars find their way to active regions where businesses can confidently invest and develop resources. Once investment dollars leave the Gulf Coast region, it will be almost impossible for them to flow back.

America needs policies that enable the development of domestic oil and gas supplies, promote the energy transition, and strengthen national security. We need a timely leasing program that provides regular scheduled lease sales without reduced acreage from what is offered in the proposed program. Without it, the U.S. is locking away a powerful source of reliable, affordable, lower carbon, and secure domestic energy.