- Valerie Volcovici and Jarrett Renshaw, Reuters
The discussions on ways Washington can compensate oil-dependent states are a sign President Joe Biden’s administration has begun studying the financial and political cost of halting new federal oil leases.
Pumpjacks in New Mexico oil fields. (Source: Shutterstock.com)
New Mexico’s Democratic senators spoke with White House National Climate Advisor Gina McCarthy earlier this month to discuss ways Washington can compensate oil-dependent states for potential revenues lost during a pause on new federal oil and gas leasing, the senators said on Feb. 12.
The discussions are a sign President Joe Biden’s administration has begun studying the financial and political cost of halting new federal oil leases, a key element of Biden’s sweeping plan to decarbonize the U.S. economy by 2050 to fight climate change.
Senators Martin Heinrich and Ben Ray Lujan told Reuters that they had a recent phone meeting with McCarthy in which they expressed a need for financial assistance to offset the impact of the moratorium and give certainty as they plan for the future, and explained that New Mexico might also need more time to transition away from drilling.
New Mexico is by far the biggest beneficiary of the federal drilling program because it hosts vast federal acreage overlying a share of the Permian Basin, the world’s most productive oil field.
Heinrich told Reuters that he was contemplating introducing a bill that could direct federal funds to states that lose revenue from federal oil drilling, similar to the Secure Rural Schools Act of 2000 that was designed to help communities hit by falling timber revenue.
“Right now what we are trying to do is put together a letter to the White House that says this is how we would put guardrails on this, and this is how you make it real when you say you don’t want to leave workers behind,” Heinrich told Reuters in an interview.
Lujan, meanwhile, raised the possibility of using “payments in lieu of taxes,” a Congressionally authorized program that sends federal payments to local governments to offset the loss of tax revenue due to the presence of federal lands, his spokeswoman said.
A spokesman for the White House declined to comment on the conversation.
A source engaged in the discussions said, however, that “the White House understands there will be critics who say halting leases will cost states money and hurt local schools
and local governments. There is interest in finding a short-term solution to make people whole during the transition.”
Biden last month signed an executive order pausing new oil and gas leasing on federal lands and waters that account for around 25% of the nation’s petroleum production pending a review of its impacts, a move widely seen as a first step to the permanent ban he promised during his campaign.
U.S. states last year collected some $1.8 billion in revenues from federal lands drilling to support publics schools and other social programs, according to the Interior Department.
Oil industry groups have blasted the drilling pause, citing New Mexico as a victim of the policy.
Heinrich said while he does not support a “unilateral ban” on oil and gas leases, lawmakers and industry need to acknowledge that the economy is shifting away from fossil fuels.
“There is going to be a transition here. We need to be honest about that,” he said.
This story was originally published on Feb. 15.