Posted on: 04. 20. 22
No matter who you are, it’s inevitable that you or someone you know has experienced financial dread when filling up your vehicle at the pump. On Friday, April, 15, the Biden administration began the first major steps toward a long-term solution that they hope will curb oil costs and make it widely more affordable.
The latest move to reopen federal land to oil and gas drilling contracts is a massive turnaround after the President suspended new leasing projects around his first week in office.
Let’s take a look at why the administration made this new decision, the details of new drilling leases, and if there are any downsides to reopening some public land for oil and gas mining.
Why Has President Biden Changed His Mind On Drilling?
Originally, President Biden halted federal drilling contracts with a greener mindset for the future of the oil and gas industry. However, as the demand for oil rose, combined with sanctions placed on Russia after the nation attacked neighboring Ukraine, gas prices eventually began to spiral out of control.
Some states like California witnessed gas prices higher than 5 dollars per gallon.
Former Promises May Not Be Enough
Last month, the President vowed to dig into the nation’s oil storage reserves and release 1 million barrels per day to ease the financial burden the average person faces at the pump.
However, national reserves are limited resources that will eventually have to be replenished. So, the President has opted to open a limited amount of federal land for future oil and gas drilling sites.
What Are the Leasing Details?
The leases in the discussion are for 225 square miles of federal land across 9 states. Although these new leases are a step forward, they are still 80 percent less than what the industry proposed as a solution to increased oil and gas prices.
Starting in June, auctions for federal land are opening up to oil and gas companies within the following states:
- Wyoming
- Utah
- Colorado
- Montana
- New Mexico
- Alabama
- Nevada
- Oklahoma
- North Dakota
Are There Any Potential Pitfalls to New Drilling Opportunities?
Although more drilling could definitely be a way to reduce crude oil prices and put the US back in its position as a crude oil producer, some believe that the addition of drilling opportunities could cost billions of dollars worth of climate damage.
Even some oil and gas companies are hesitant as the new leases come with higher royalty rates than the nation has seen in nearly a century. The new rates will increase from 12.5% to 18.75%.
While there are definitely concerns about the decision from either side of the political aisle, one thing is clear, new leases could see our nation producing ample oil into 2030, and that could be a great start towards recovering from the current state of our industry’s prices.
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If you manage an oil and gas company, then you most likely already have plans to bid on new drilling projects for your team. Whether your team needs a reliable gas conditioning system or a total compressed natural gas package, Pro-Gas, LLC has some of the most quality equipment in the industry available to our nationwide clients.
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