Updated December 22, 2021
Offshore Oil and Gas: Biden Administration’s Leasing “Pause”
and Review
On January 27, 2021, President Joe Biden issued Executive
five-year oil and gas leasing program for 2017-2022.
Order (E.O.) 14008, directing multiple administrative
BOEM had paused Lease Sale 257 in the Gulf of Mexico,
actions to address climate change. Section 208 of the order
originally scheduled for March 17, 2021, and had paused its
directed the Secretary of the Interior to “pause new oil and
early planning work for Lease Sale 258 in Alaska’s Cook
natural gas leases on public lands or in offshore waters
Inlet. Also, BOEM made no announcements and initiated
pending completion of a comprehensive review and
no planning regarding Lease Sale 259, a second lease sale
reconsideration of Federal oil and gas permitting and
planned for the Gulf of Mexico later in 2021.
leasing practices,” to the extent that such actions were
“consistent with applicable law.” The leasing pause was
DOI resumed work on lease sales to comply with the legal
blocked by a court order in June 2021.
injunction on implementing the pause. DOI submitted a
record of decision for Lease Sale 257 in the Gulf of Mexico
The leasing review called for in the E.O., however, was
on August 31, 2021, and the sale was held on November 17,
completed in November 2021. The E.O. directed that the
2021. The sale yielded $192 million in high bids on 1.7
review evaluate “potential climate and other impacts”
million acres. Compared with other Gulf sales held in the
associated with oil and gas leasing, as well as whether to
2017-2022 leasing program, this was the second-highest
adjust royalties paid to the federal government from
return in terms of bid revenues and the highest acreage bid
onshore and offshore oil and gas production to account for
on. DOI further announced that BOEM would issue and
“climate costs.”
take comments on a draft environmental impact statement
for the lease sale in Alaska’s Cook Inlet.
Status of Leasing Pause and Review
As implemented by the Department of the Interior (DOI),
BOEM has not announced action on Lease Sale 259, the
the leasing pause consisted of a halt on sales of new
other lease sale scheduled for the Gulf for 2021, or on the
onshore and offshore oil and gas leases following issuance
final lease sale in the current five-year program (Gulf Lease
of the E.O. Exploration and development of existing leases
Sale 261, scheduled for 2022). Not all sales scheduled in a
were not halted. Some stakeholders contended the pause
five-year leasing program are necessarily held; for instance,
would affect long-term prospects for oil and gas
a scheduled sale could be canceled based on sale-specific
investment, production, and revenues, while others asserted
environmental review under the National Environmental
it would have few such impacts, given that activities on
Policy Act (NEPA; 42 U.S.C. §§4321 et seq.).
existing leases were continuing.
DOI’s Review and Future Lease Sales
On June 15, 2021, in response to a lawsuit filed by multiple
DOI’s November 2021 review of the federal oil and gas
state attorneys general, the U.S. District Court for the
leasing program recommended some changes for offshore
Western District of Louisiana issued a preliminary
lease sales going forward. Specifically, DOI recommended
injunction (___—F. Supp. 3d—___, 2021 WL 2446010
that BOEM consider alternatives to its current practice of
(W.D. La. June 15, 2021)) prohibiting DOI from
area-wide leasing, under which all available (i.e., not
implementing the leasing pause with respect to both
previously leased or withdrawn) lease blocks within a given
onshore and offshore lease sales that the agency had halted.
offshore planning area or broader offshore region are
The court found, among other things, that DOI had acted in
offered in a single lease sale. DOI cited studies finding that
an “arbitrary and capricious” manner, in violation of the
area-wide leasing reduced “the amount of competition and
Administrative Procedure Act (5 U.S.C. §§551 et seq.), by
the value of bids for each lease tract.” Instead, DOI
halting the lease sales solely on the basis of the E.O.
recommended offering “smaller areas” at each lease sale,
narrowed through criteria related to environmental
DOI complied with the court order by resuming work on
protection, subsistence uses, resource potential, and
leasing activities, including planning for two offshore lease
financial considerations. Some industry commentators have
sales. DOI also completed its review of the federal oil and
opposed this idea, suggesting that resource access
gas leasing program and issued a report on November 26,
restrictions could result in unfulfilled oil and gas demand
2021, with recommendations concerning offshore and
and a greater need for energy imports.
onshore lease sales and fiscal terms.
DOI’s recommendations could affect BOEM’s work on the
Offshore Lease Sales Resumed
upcoming five-year offshore oil and gas leasing program.
Pursuant to the E.O.’s leasing pause, DOI’s Bureau of
BOEM’s current five-year program ends in June 2022.
Ocean Energy Management (BOEM) had postponed two
During the Trump Administration, BOEM released a draft
lease sales that were scheduled for 2021 under the agency’s
of a new five-year program, but BOEM has not announced
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Offshore Oil and Gas: Biden Administration’s Leasing “Pause” and Review
further steps during the Biden Administration. Questions
but contend they are insufficient to address climate impacts
remain about area leasing decisions for the next five-year
from offshore oil and gas leasing. Some express the view
program and about the timing of the program’s publication.
that the Biden Administration’s emission reduction goals
For more information, see CRS Report R44692, Five-Year
could be met only by ending federal offshore oil and gas
Offshore Oil and Gas Leasing Program: Status and Issues
leasing altogether.
in Brief.
Offshore Revenue Considerations
Fiscal Terms of Offshore Leases
Offshore oil and gas revenues provide most or all of the
DOI’s November 2021 review recommended revisions to
funding for several federal conservation and restoration
the fiscal terms of offshore oil and gas leases, such as
programs, including the Land and Water Conservation Fund
royalty rates, “to monetarily account for the costs of carbon
(54 U.S.C. §§200301 et seq.), the Historic Preservation
dioxide, methane, and nitrous oxide.” DOI has discretion to
Fund (54 U.S.C. §§303101-303103), and the National Parks
regulate such fiscal terms under the Outer Continental Shelf
and Public Land Legacy Restoration Fund (54 U.S.C.
Lands Act (OCSLA; 43 U.S.C. §§1331-1356b) and other
§200402). Also, under the OCSLA and the Gulf of Mexico
authorities. The review did not recommend specific changes
Energy Security Act of 2006 (43 U.S.C. §1331 note), a
but instead stated that BOEM and the Bureau of Safety and
portion of offshore oil and gas revenue is shared with
Environmental Enforcement (BSEE) would study the
coastal states, with most of the funds going to Alabama,
matter. Some bills in the 117th Congress would mandate
Louisiana, Mississippi, and Texas for coastal protection and
specific changes. For instance, House-passed budget
restoration.
reconciliation legislation—H.R. 5376—includes provisions
to raise the minimum royalty rate for offshore oil and gas
Federal offshore oil and gas revenues fluctuate from year to
leases to 14%. (The current minimum is 12.5%, and royalty
year based on multiple factors and totaled $4.1 billion in
rates established by BOEM for existing leases range from
FY2021. More than 90% of this total came from royalties,
12.5% to 18.75%, depending on the lease date and water
with the remainder from bonus bids at lease sales, rents
depth.) H.R. 5376 also would establish new fees for
paid prior to production, and other sources. Fiscal reforms
offshore oil and gas leases and would make other changes
such as those discussed above could affect offshore
to offshore fiscal terms.
revenues going forward, with uncertain outcomes. For
example, if offshore royalty rates for new leases increased,
The DOI review indicated that BOEM and BSEE would
this could result in higher federal revenues available for
reevaluate guidance on granting offshore operators royalty
disbursement to state and federal programs. Alternatively, if
relief—a reduction or waiver of royalties, typically to
the royalty rates were high enough that operators were
promote increased production—“insofar as royalty relief
discouraged from investing in new leases, lower federal
can have the effect of subsidizing uneconomic production at
revenues and disbursements could result.
taxpayers’ expense.” The House-passed version of H.R.
5376 would go further by prohibiting the Secretary of the
Additional Reading
Interior from offering royalty relief on offshore leases.
For additional information related to the E.O. 14008 leasing
Also, the DOI review noted BOEM’s and BSEE’s work on
pause, see CRS Legal Sidebar LSB10627, Unpaused:
a proposed rulemaking to strengthen companies’ financial
District Court Enjoins Biden Administration from
assurance coverage, and the review recommended
“Pausing” Oil and Gas Leasing on Federal Land, by Adam
establishment of a “fitness to operate” standard to ensure
Vann. For information on offshore oil and gas lease sales
offshore operators can meet their safety, environmental, and
and planning, see CRS Report R44692, Five-Year Offshore
financial responsibilities.
Oil and Gas Leasing Program: Status and Issues in Brief,
by Laura B. Comay CRS Report R44692, Five-Year
Opponents of such changes in offshore fiscal terms contend
Offshore Oil and Gas Leasing Program for 2019-2024:
the changes would discourage investment in federal
Status and Issues in Brief, by Laura B. Comay; and CRS
offshore oil and gas development, thus resulting in greater
Report R44504, Five-Year Program for Offshore Oil and
reliance on foreign oil and gas developed with fewer
Gas Leasing: History and Program for 2017-2022, by
environmental safeguards than the United States requires.
Laura B. Comay, Marc Humphries, and Adam Vann. For
Some argue that increases in the costs of development
information on offshore revenues and royalty relief, see
would be reflected in lower bids at offshore lease auctions,
CRS Report R46195, Gulf of Mexico Energy Security Act
so that the changes might not achieve the goal of
(GOMESA): Background, Status, and Issues, by Laura B.
accounting for climate impacts by raising the overall costs
Comay and Marc Humphries; and CRS Insight IN11380,
of leasing in federal waters. Supporters of the changes state
Offshore Royalty Relief: Status During the COVID-19
that they would provide a fairer return to taxpayers and
Pandemic, by Laura B. Comay.
would address concerns raised by the Government
Accountability Office, among others, about
Laura B. Comay, Specialist in Natural Resources Policy
decommissioning liabilities and fiscal returns from the
offshore leasing program. Others, including many
IF11909
environmental groups, support the recommended changes


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Offshore Oil and Gas: Biden Administration’s Leasing “Pause” and Review


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https://crsreports.congress.gov | IF11909 · VERSION 3 · UPDATED

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