(CNN) — US President Joe Biden will announce an unprecedented release of oil from US reserves and is taking action to punish oil companies for failing to increase production from unused leases on federal land, the White House said.
The steps are an attempt to lower gasoline prices while at the same time forcing oil companies to increase supply.
“After consulting with allies and partners, the president will announce the largest release of oil reserves in history, putting on the market an additional million barrels per day on average, every day, for the next six months,” the statement said. White House.
“The scale of this release is unprecedented: the world has never had a release of oil reserves at this rate of one million a day during this time period. This record release will provide a historic amount of supply to serve as a bridge to the end of the year in which national production increases”.
“Historic” oil release
The historic release of a million barrels a day from the US strategic petroleum reserve will act as a “bridge” as oil production in the country and the world recovers after the pandemic, a top official said on Thursday. administration official.
The move was made in coordination with US allies abroad, including in Europe, though officials declined to say whether other countries were also releasing barrels from their reserves.
The first barrels will hit the market in May, the official said. Barrels from Biden’s earlier release, announced last month, are still being shipped.
The United States will replenish barrels in the Strategic Petroleum Reserves (SPR) when oil prices decline, the official said, which could help further fuel production in the future.
Still, officials declined to say how quickly or by how much gasoline prices might drop as a result of the statement. And they said they were not focused on “immediate short-term price movements” in the oil market.
Instead, they said their goal was to address supply shortages as Russian oil exited the market, which they said would translate into relief for American consumers.
Non-produced land use fees
The president will also ask Congress to “make companies pay fees for wells on their leases they haven’t used in years and for acres of public land they are hoarding without producing.” For months, the Biden administration has publicly pushed back against the idea that regulations are preventing oil producers from producing more in the country, pointing to millions of acres of land with approved permits for oil and gas production.
“Companies that are producing from their leased acres and existing wells will not face higher tariffs,” the fact sheet says, “but companies that continue to sit on non-producing acres will have to choose whether to start producing or pay a tax. for every idle well and unused acre.”
For months, the Biden administration has publicly pushed back against the idea that environmental and other regulations are preventing oil producers from producing more in the country, pointing to millions of acres of land with approved permits for oil and gas production. .
“Too many are choosing right now to make windfall profits without investing in more supply,” a senior administration official told reporters. “That’s why today the president is proposing a policy of use it or lose it to encourage companies to produce more in the short term with the resources they already have.”
The official said the oil and gas industry has more than 9,000 unused but approved production permits on federal land and more than 12 million unused acres.
“Congress should force companies to pay for the use of unused wells on federal land and on acres of public land that they are sitting on without producing,” the official said.
Businesses using their leased acres will not face higher fees, the administration said, but businesses with non-producing acres would face penalties for “every idle well and unused acre.” Companies can take years to develop leases, and it’s unclear whether the proposed tariffs would apply to land not yet ready for production.
“We think the industry needs to step up and needs to do more than invest in additional production,” the official said. “There are companies that have said they are doing the right thing right now and ramping up production.”
“However,” they added, “there are also companies that have not said that, and in fact some leaders in the industry that have said that no matter what the price is, they are not going to produce more. Instead, they focus on returning dividends or distributions to shareholders and their owners.”
The oil and gas industry, including the American Petroleum Institute, has argued that federal law already requires producers to use their leases or return them to the government.
Biden seeks to increase production of oil and other minerals
Biden will also issue a directive to invoke the Defense Production Act to stimulate domestic production of critical minerals needed to make batteries for electric vehicles and long-term energy storage.
The White House move adds critical minerals such as lithium, nickel, graphite, cobalt and manganese to the list of items covered by the Defense Production Act of 1950, a Korean War-era law that allows the president to use the emergency authority to place large orders for a certain type of product or expand production capacity and supply. This will cause the administration to support the production and processing of these critical minerals needed for a clean energy transition.
The Department of Defense will implement this authority, in agreement with the White House, and will do so in consultation with tribal communities and using strong environmental, labor, and community standards.
Sen. Joe Manchin, the crucial vote for Democrats on his economic and climate bill, is a strong advocate for using the Defense Production Act to stimulate production of critical minerals in the United States. Manchin and three Republican senators wrote to Biden earlier this month asking him to invoke the Defense Production Act to domestically produce and process critical minerals like lithium and graphite.
“I like the defense production — go for it, go for it,” Manchin told CNN yesterday when asked if he supported the president’s action.