The Fuse

Obama Administration Finalizes Methane Rule, Bans Arctic Drilling

by Matt Piotrowski | November 17, 2016

With just a couple of months before leaving office, the Obama administration is making big policy decisions on energy and the environment, by tightening rules for oil and gas drilling on public lands and banning drilling in the Arctic. These moves should come as no surprise given that restricting fossil fuel production to reach environmental goals has been a priority of Obama for the past eight years, even though the largest oil boom in the country’s history occurred under his watch. The ban on Arctic drilling comes at a time drilling in that region is uneconomic but holds large potential, while the methane rules will be challenged by Republicans and could be overturned after Donald Trump is sworn in as president in January.

The Bureau of Land Management (BLM) finalized on Tuesday its rule for reducing leaking of methane from oil and gas drilling on federal lands. “This rule to prevent waste of our nation’s natural gas supplies is good government, plain and simple,” Department of Interior Secretary Sally Jewell said in a statement.

Industry, however, took issue with the ruling. “The BLM’s rush to regulate something already being regulated at the state and federal level is an example of poor government policy and a left hand not knowing what the right hand is doing,” said American Petroleum Institute (API) Director of Upstream and Industry Operations Erik Milito in a statement. “BLM’s new regulations are unnecessary, redundant, technically flawed and could stifle the innovations that have led to our nation’s environmental successes.”

Republicans also blasted the BLM move. Sen. John Barrasso, a Republican from Wyoming and the next chair of the Senate Environment and Public Works Committee, said that Congress would seek to overturn the methane regulation. “The Republican majority on Congress will not let this rule stand. We will work with President-elect Trump to revoke this rule either administratively or through the use of the Congressional Review Act.”

Trump said during the 2016 campaign that he supported opening federal lands to drilling and rolling back environmental regulations imposed by the Obama administration.

Blocking Arctic drilling

Meanwhile, reports surfaced early this week that Obama is trying to ban Arctic drilling for the next five years. Based on an article in Bloomberg, the outgoing administration is poised to halt the sale of new oil and gas drilling rights in U.S. Arctic waters. This would occur under a five-year plan, giving a victory to environmentalists who argued that drilling in the areas would threaten wildlife in the region. On Friday, the administration formally announced the ban. The plan would be, however, subject to a 60-day congressional review and could be rewritten by President-elect Donald Trump, though that could take months or years. The U.S. Geological Survey said in 2008 that it estimates that there are some 90 billion barrels of oil and 1,669 trillion cubic feet of natural gas located north of the Arctic Circle.

oil and gas resources

The move follows other attempts by the Obama Administration to restrict access to supply in federal waters—earlier this year, it announced that the Mid-Atlantic Outer Continental Shelf (OCS) would be off limits for bidding during the 2017-2022 planning period, which was a major policy reversal.

The region’s remote location, lack of infrastructure, harsh conditions, and most importantly, the high-cost of drilling have kept companies from following through on Arctic oil drilling.

The plan will not allow drilling in the Beaufort and Chukchi seas, which are north of the Arctic Circle, from 2017-22. This is a departure from the administration’s previous five-year blueprint. Although the resources in the Arctic are plentiful and are key for the U.S.’ long-term energy security, companies have abandoned interest in the region because of market conditions. For instance, Shell last year announced that it dropped its plans to produce oil in the Chukchi Sea as it could not find enough oil there after spending billions. The region’s remote location, lack of infrastructure, harsh conditions, and most importantly, the high-cost of drilling have kept companies from following through on Arctic oil drilling.