Biden reverses a climate policy. Oil stocks may not benefit.

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A drilling rig and pump jack sitting on federal land in Lea County, New Mexico.

Callaghan O’Hare/Bloomberg

A key part of the Biden administration’s efforts to slow greenhouse gas emissions from energy production has been rolled back, but that may not do much for the oil industry.

The administration announced on Monday that it would resume leasing oil and gas rights on federal lands, after a judge ruled it would have to start them again.

It’s a win for the industry, but one that may not have much practical impact in the short term. In fact, shares of companies that depend on federal leases have mostly been down since Monday, a sign that investors are still not convinced this will be a boon for the industry.

Stopping leases on federal lands was one of President Biden’s most controversial energy proposals during the election. Opponents said it would destroy jobs in the industry, and investors began avoiding some oil producers as the election approached. In the lead-up to the election, however, oil companies stocked up on leases — enough to carry them for several years. So when Biden ordered a moratorium on new federal leases shortly after taking office, some businesses had enough to potentially go four years without having to buy another lease. Additionally, there has been a nationwide slowdown in oil and gas production as companies have held on to cash to return more to shareholders and pay down debt. So even if more land were available, there is unlikely to be a land rush now.

Biden will now appeal the judge’s decision and take over the leases in the meantime. But some industry advocates are skeptical of the government’s plans. Twelve industry trade groups, including the American Petroleum Institute (API), sued the Department of the Interior in federal court in Louisiana over the “indefinite pause” in leasing. API said the department’s policy “continues to create uncertainty for U.S. natural gas and oil producers.”

API noted that the department has yet to release a timeline or details on when rental sales will resume and how they will operate.

Ask by Barrons for those details, the ministry declined to comment. The department also pointed out in its release on the resumption of lease sales that the leasing program has historically been criticized for failing to consider climate change, the impact on Native American lands and other issues. While leases could resume, the ministry wants to address some of these issues. It plans to “conduct the rental in a manner that takes into account the program’s many shortcomings,” the statement said. For oil companies, this wording implies that federal leasing could be more expensive than it has sometimes been in the past.

The actions most in play include


EOG Resources

(symbol: EOG),


Murphy’s Oil

(WALL), and


Devon Energy

(DVN), all of which have historically leased significant amounts of federal land or water for production. EOG and Devon shares have fallen over the past two days. Murphy fell on Monday, but rose 1.3% on Tuesday.

Write to Avi Salzman at avi.salzman@barrons.com


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Felix J. Dixon