2024: A policy crossroads for American offshore energy

As we usher in the close of 2023, the offshore energy sector stands at a pivotal juncture, grappling with the uncertain policies and attitudes of the federal government. While challenges are not unfamiliar to our industry, the current political landscape is laden with profound implications for our nation's energy security and economic prosperity.

For too long, we've eagerly anticipated the launch of the much-awaited federal offshore oil and gas leasing program, a legal imperative. Astonishingly, when the previous program expired in June 2022, a replacement was nowhere in sight. 

Fig. 1. Under the leadership of Secretary of the Interior Deb Haaland, the federal offshore oil and gas leasing program has had a number of stops and starts. Image: U.S. Department of the Interior.

The failed Biden leasing plan. Come late September, the administration (Fig. 1) unveiled the new leasing program, succinctly described in one word: a failure. It offers a mere three offshore oil and gas lease sales in the Gulf of Mexico, scheduled for 2025, 2027, and 2029—a stark departure from the historical norm of at least 10 sales in the Gulf over the program's duration. 

Compounding this misstep, the Department of the Interior chose to postpone the requisite lease sale-specific environmental reviews. Traditionally completed concurrently with program development, these reviews take one to two years. Previous administrations, regardless of their political affiliations, diligently followed this process to ensure uninterrupted leasing activities. 

Remarkably, the decision to include only three sales in the next oil and gas leasing program will impede momentum behind offshore wind development. To issue offshore wind leases while adhering to the Inflation Reduction Act (IRA), the DOI must offer at least 60 million acres annually for offshore oil and gas leasing.  

With only three potential sales spread across five years, the Interior Department will be unable to comply with the IRA and legally conduct offshore wind lease sales annually through 2029—a critical factor for supporting the growth of offshore renewables along America’s coastlines. 

Fig. 2. The Rice's whale has been the centerpiece of administration attempts to sidestep Congress, the public, and established regulatory processes, to impose extensive restrictions on Gulf of Mexico lease sales. Image: NOAA Fisheries.

Environmental challenges. But the challenges don't end there. In July 2023, the Biden administration reached a voluntary settlement with activist groups concerning protections for the Rice's whale (Fig. 2), a species already safeguarded under the Endangered Species Act and the Marine Mammal Protection Act. 

This agreement allowed the administration to sidestep Congress, the public, and established regulatory processes, imposing extensive restrictions while removing millions of prime acres from Gulf of Mexico oil and gas Lease Sale 261. These restrictions significantly deviated from established best practices, introducing vessel speed limits and constraints on night travel and visibility across the entire Gulf of Mexico—an area where the presence of the whale is minimal. 

Lease Sale 261. Fortuitously, after numerous rulings and delays, Lease Sale 261, at the time of writing, is slated to be held at the end of December 2023. In the initial preliminary injunction, the U.S. District Court for the Western District of Louisiana found the actions related to the Rice’s whale procedurally invalid and the Interior's decision arbitrary and capricious.  

Even through the litigation and rulings, it's important to emphasize that there were no legal or operational constraints preventing the Interior from proceeding with Lease Sale 261, on schedule and without restrictions.  

Implications of delays. The needlessness of the Lease Sale 261 delays raises concerns yet again, particularly in the face of geopolitical instability and oil market fragility, due to ongoing armed conflicts in multiple oil-producing regions, about the implications of Biden administration energy policy, writ large.  

The implications of these actions go far beyond our industry. They affect the broader economy, energy security, and energy affordability. The overwhelming uncertainty in the offshore energy sector hinders companies' ability to make investment decisions and plan for future projects. 

This lack of clarity stifles innovation, restrains economic growth, and risks diverting investments to other regions worldwide. Despite the Gulf of Mexico's abundant reserves of hydrocarbons, skilled workforce, and robust infrastructure, the region's attractiveness for energy development is at risk without access to new acreage and energy projects. 

Fig. 3. The BP-operated Mad Dog field, now in operation for 18 years, is a good example of how the Gulf of Mexico supports hundreds of thousands of jobs, attracts billions in investments, and generates substantial government revenue, year after year. Image: U.S. Bureau of Safety and Environment Enforcement.

The Gulf of Mexico is a lifeline that supports hundreds of thousands of jobs, attracts billions in investments, and generates substantial government revenue. Additionally, it produces among the lowest- carbon barrels of oil in the world. As energy demand continues to rise, the Gulf of Mexico clearly represents an environmentally advantageous asset, compared to other options globally, Fig. 3. 

All these benefits are jeopardized without a firm commitment to ongoing energy development. As inflation soars, particularly in energy prices, and global instability looms, the U.S. and our allies face strategic disadvantages, if Gulf of Mexico production dwindles. Moreover, emerging offshore energy sectors, like offshore wind and carbon sequestration, depend on the expertise of companies integral to the offshore oil and gas industry. 

Many of these companies play a pivotal role in these nascent U.S. sectors, as they all involve marine construction and engineering, making their success instrumental for the growth of American offshore wind farms and Gulf of Mexico carbon sequestration projects.  

The current state of the offshore oil and gas leasing program is not merely a missed opportunity; it's a step backward. It threatens our energy future and weakens our position on the global stage. 

The outlook in Congress. The encouraging news for the new year is the bipartisan interest in Congress to address this issue. Notably, when every Democrat in Congress voted in favor of the Inflation Reduction Act, it underscored their support for mandated Gulf of Mexico oil and gas lease sales. Moreover, earlier in 2023, H.R. 1, the Lower Energy Costs Act, which also mandated Gulf of Mexico oil and gas leasing, garnered bipartisan support as it passed the House of Representatives. 

There are several important pieces of legislation that could see the floor very soon. These bills, from Gulf Coast energy champions, such as Senators Bill Cassidy (R-La.) and Ted Cruz (R-Texas) and Congressman Garret Graves (R-La.), would help provide nearer- term certainty for the Gulf of Mexico by mandating multiple offshore oil and gas lease sales over the next few years.  

Importantly, there is a strong chance these bills, like H.R. 1, will attract bipartisan support. After all, the benefits of a strong Gulf of Mexico transcend political parties and benefits very every American.  

Collaboration is required. As we navigate the complex waters of 2024, it is imperative that collaboration with elected officials becomes more than a necessity; it becomes a shared commitment to a course correction. They need to hear our story, and NOIA is making sure our message is heard. The benefits of a robust Gulf of Mexico extend beyond political affiliations and regional boundaries, encompassing economic prosperity, job creation, and environmental sustainability for every American. 

In fostering bipartisan collaboration, we can ensure that our offshore energy resources not only weather the challenges of the present but emerge stronger and , more resilient for the future benefit of all Americans. Oil and gas are foundational components of our energy system and will support our economy for decades to come. The journey ahead may be uncertain, but with bipartisan unity and a collective vision, we can navigate the challenges and chart a course that propels American offshore energy to new heights in 2024 and beyond. 

About the Authors

Erik Milito

National Ocean Industries Association (NOIA)

Erik Milito is president of the National Ocean Industries Association (NOIA), having taken the helm of the association on Nov. 1, 2019. He has extensive experience in implementing strategic outreach and public relations platforms for high-profile issues on behalf of the energy industry. He is a seasoned spokesperson and lobbyist, testifying before Congress on key energy issues on numerous occasions. Mr. Milito comes to NOIA from the American Petroleum Institute (API), where he served for the previous 17 years. He holds a Juris Doctor from Marquette University Law School, and a BBA degree from the University of Notre Dame.