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June 2, 2020

US scraps over 10,000 acres of oil auctions amid Covid-19 uncertainty

By JP Casey

The Trump Administration has scrapped a series of oil and gas licencing auctions, halting new offshore developments in US territory as the Covid-19 pandemic continues to disrupt the oil and gas industry.

The Bureau of Land Management (BLM), the body within the Department of the Interior responsible for lease sales on around 245 million acres of public land, has postponed sales of more than 10,000 acres in Nevada and 88 acres in Mississippi, both of which were expected to go up for auction later this month. The move follows the suspension of an auction for 45,000 acres of land in New Mexico, which was expected to take place in the last few days of May, and the suspensions have turned into a negative trend that has undermined the government’s commitment to propping up its oil and gas industry.

US oil and gas has struggled across the board in recent months, with the lockdown measures implemented as part of the Covid-19 response, and a greater awareness of the importance of workplace safety, cutting into offshore production. Fracking has been hit particularly hard, with the number of basins being worked in US territory collapsing from 780 at the start of the year to just 162 by April as the oil and gas industry struggles to balance workplace safety and productivity.

These struggles have also had a financial impact on the sector. In April, Trump enacted a funding plan to provide financial assistance for oil and gas producers when the oil price plummeted below zero, with the president apparently willing to take a short-term financial hit in order to support the US offshore industry. The BLM has also announced that it would be accepting public feedback on proposed oil and gas auctions in the states of Montana and North Dakota, but with the financial viability of US oil and gas now in question, and the Trump Administration placing many licencing rounds on hold, it remains to be seen if these sales will go ahead.

The suspension of sales is also a significant disruption to Trump’s “energy dominance” agenda, a long-term programme to improve US energy independence by opening up more of federal land to major industrial works. With this in mind, the Covid-19 pandemic has caused economic, safety, and political headaches for the US oil and gas industry.

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