EXCLUSIVE: Biden Admin Talks Tough On Big Oil, But Gave Them Regular Access To Discuss Key Regulatory Change
Nick Pope on October 27, 2023
The Biden administration gave oil industry lobbyists and representatives a regular audience in 2021 to discuss a key regulatory change that is shaping up to work in the interest of major oil companies, while hammering the industry’s major players as profiteers harming the environment, according to emails obtained by the Functional Government Initiative (FGI).
The communications between officials from the Department of the Interior (DOI), Bureau of Ocean Energy Management (BOEM), American Petroleum Institute (API) and major oil companies occurred primarily in 2021, and pertained to federal rules for decommissioning offshore drilling areas. BOEM later published a new proposal to change those rules on June 29 of this year, which would create a revised system for companies to set aside funds for lease area clean-up that some observers say shields the world’s biggest oil producers from billions in potential liability for decommissioning costs.
The proposed changes to the rules, known as federal bonding, could benefit the major industry players operating in the Gulf of Mexico while putting smaller, independent oil and gas companies at a disadvantage, according to analysis conducted by Gibson Dunn, a major law firm. The rules would effectively make smaller oil and gas lessees put up more money for lease-area cleanup.
“These records paint a picture of the Biden administration saying one thing publicly while appearing to do another behind closed doors. Ironically, in this instance it seems that coziness between senior political appointees at Interior and representatives of Big Oil may be the driver of BOEM’s latest rule on offshore bonding,” Pete McGinnis, spokesman for FGI, told the Daily Caller News Foundation of his organization’s findings.
Major oil companies and API communicated with Biden administration officials on at least six occasions between April and October of 2021, including several calls and virtual meetings that were focused specifically on the bonding issue, the emails show. The bonding rules were mentioned in other communications that more generally addressed the industry’s activities in the Gulf of Mexico as well.
The only thing stopping Big Oil from increasing production is their decision to pay shareholders billions instead of reinvesting profits.
Instead of demanding accountability, Republican officials are blaming us.
I’m doing my part to lower prices, it’s time Big Oil did theirs. https://t.co/FNjn3svgSU
— President Biden (@POTUS) February 1, 2023
President Joe Biden accused major oil companies of profiteering on the energy market conditions of summer 2022, which many critics assert were a result of the policies of his sweeping climate agenda. He floated the possibility that his administration would investigate the companies for price gouging if they raised prices during Hurricane Ian in September 2022.
However, the Biden administration’s proposed changes to the bonding rules could benefit the same oil titans that Biden has criticized, according to several analyses.
The old bonding rules established supplemental bonding prices for lessees based on the net worth of that lessee, among other factors, according to Gibson Dunn. The June 2023 proposal from BOEM would shift that calculus away from net worth and instead focus on the lessee’s credit rating.
BOEM’s stated logic for the proposed change is that credit rating is a better indicator of how resilient a lessee is in the face of unforeseen shocks than net worth. Therefore, net worth makes a better metric for assessing the risks of leaving taxpayers exposed to the liabilities that would be incurred if a lessee goes bankrupt or is otherwise unable to cover the costs of decommissioning an offshore drilling site, according to the proposal’s Federal Registry entry and Gibson Dunn.
Critics of the proposed change say that it may benefit the publicly-traded major oil companies, because smaller companies with lower credit ratings would have to pay higher fees up front, according to the Louisiana Illuminator. The cost to smaller businesses could run as high as $380 million each year, according to the U.S. Small Business Administration’s Office of Advocacy.
API, however, rebuffed criticism of the proposal.
“API regularly engages with a broad range of stakeholders on the critical role U.S. natural gas and oil can play in strengthening energy security while meeting demand for affordable, reliable energy,” an API spokesperson told the DCNF. “Production in the Gulf of Mexico is responsible for nearly 15% of U.S. crude production, and this industry is committed to responsibly developing our offshore resources to ensure Americans can continue to reap the benefits of this region for decades to come.”
The proposed rules ensure that smaller operators with higher bankruptcy potential have a more substantial stake in the completion of clean-up efforts, an outcome which could benefit all offshore operators and onshore small businesses in the Gulf of Mexico region by keeping the lease areas in good shape and well-managed, an API official told the DCNF. There have been 36 bankruptcies of companies involved in Gulf of Mexico operations since 2009, and there are alternative measures allowed under the proposal that may not be as onerous as opponents of the proposal would suggest, the API official said.
The DOI, BOEM and the White House did not respond immediately to requests to comment.
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