Oil and gas officials are worried about the long-term effects of a federal government shutdown, concerned that congressional priorities will get lost in political chaos and that key departments could get hollowed out.
In the short term, the main problem for oil and gas producers from a shutdown would likely involve permits for drilling on public lands. The longer a shutdown lasts, the more the effects would widen as companies try to execute plans.
The White House formally initiated the shutdown Tuesday before midnight after the Senate failed to pass legislation to keep the government open.
“Government shutdowns threaten to stall the development of oil and gas resources on federal lands — delaying energy projects and hurting consumers who depend on affordable, reliable energy,” Anne Bradbury, CEO of the American Exploration & Production Council, said in a statement.
The world of oil and gas is more sheltered than other regulated industries, such as tourism, from the effects of federal shutdowns. State agencies handle oil and gas well permits for private and state lands, which is where the bulk of domestic production occurs. Still, a lengthy shutdown would be felt by oil and gas operators.
“If it goes on for multiple weeks, then companies can potentially run into difficulties,” Melissa Simpson, president of the Western Energy Alliance industry group, said in an email. “We’ve been through shutdowns in the past, so our industry has experience in these situations. Of course, nobody knows how long this could last, but if it’s only for a handful of days there is not much concern.”
At the federal level, some key energy-related agencies have income of their own that does not come directly from Congress — and that could allow some work to continue, said Travis Annatoyn, a former deputy solicitor for energy and mineral resources at the Interior Department in the Biden administration who is now counsel at the Arnold & Porter law firm.
Among those are the Interior’s Bureau of Land Management, the Pipeline and Hazardous Materials Safety Administration at the Department of Transportation, and the Federal Energy Regulatory Commission.
In past shutdowns, employees who do safety monitoring for onshore and offshore oil and gas production have generally continued their work.
In a shutdown plan posted Tuesday, PHMSA said pipeline safety activities “funded by other than annual appropriations” would continue during a lapse in annual appropriations, as would investigations of hazardous materials accidents. FERC also posted the agency’s most recent plans in the event of a lapse in appropriations.
BLM spokesperson Brian Hires said Tuesday that the agency would release its shutdown plans once a shutdown begins.
Interior spokesperson Alyse Sharpe said Tuesday that the department did not have “anything to share at this time.” But POLITICO, citing two people familiar with the plan, reported Tuesday that Interior would designate workers who process drilling permits and focus on oil and critical minerals issues as essential workers during a government shutdown.
Also on Tuesday, Interior’s Bureau of Safety and Environmental Enforcement, which helps regulate energy extraction in federal offshore waters, said it plans to retain about 67 percent of its workers during the shutdown to ensure continued “critical permitting and oversight activities.”
That includes processing requests for permit modifications, inspecting operations on the outer continental shelf, drilling oversight and budget planning for fiscal 2027. Agency actions that would cease include non-essential training, work on some new regulations and studies not connected to major ongoing activities.
In recent years, the United States been pumping more oil out of the ground than any country ever, including under former President Joe Biden, whose policies President Donald Trump has blasted.
This year, domestic oil production is expected to grow over 1.5 percent compared with 2024, according to the U.S. Energy Information Administration’s most recent short-term energy outlook. Natural gas production is expected to rise by more than 3 percent from last year to 2025, according to the same report.
But a key concern across the industry is how much time Congress will spend simply debating how to reopen the government while other priorities languish. The oil and gas industry has been closely watching for progress on reauthorization of pipeline safety programs and efforts to streamline the process of getting environmental permits.
“A government shutdown can also slow the legislative work of [Congress] as well, impacting everything from staff’s ability to meet to member’s legislative priorities,” Charlie Riedl, executive director of the Center for LNG, said in a statement. “A government shutdown will impact different parts of the government differently.”
Simpson with the Western Energy Alliance said Trump’s declaration of an “energy emergency” last January may mean that more federal workers that work in energy could be deemed as essential than in past shutdowns.
“The administration has taken a pretty expansive view of its emergency authorities across the board,” said Annatoyn of Arnold & Porter. “Is this a situation where they apply that type of thinking to keep conventional energy production ramped up to 10? I think it’s not out of the question.”
‘Energy ecosystem’
While industry trade groups are concerned that drilling would slow during a shutdown, environmentalists are concerned that it might run wild.
Athan Manuel, director of the Sierra Club’s Lands Protection Program, said he’s worried about the shutdown because the administration has already been cutting land management budgets and staffing for months.
“We’re nervous about what’s going to happen because no one’s going to be watching these lands and no one’s going to be watching these resources,” he said.
Trump has also talked about using the shutdown to cut federal jobs, and some people in the oil and gas industry worry that offices they’ve worked with for years could be hollowed out or eliminated.
Annatoyn said he expects Department of Justice lawyers with active cases to file a flurry of motions asking for extensions in ongoing cases. Depending on how long the government is closed, funding issues could impede the court system’s ability to function.
For Federal Register notices with ongoing public comment periods, deadlines may be followed as planned. Many routine matters at agencies would be delayed.
Matthew Bernstein, vice president of North American oil and gas at Rystad Energy, said data collection and reporting could be delayed at places like EIA, which is under DOE.
“Everyone within the energy ecosystem who’s dealing with this data, which of course includes operators, investors and firms like Rystad, all of that obviously would be impacted,” Berstein said in an interview Tuesday. “But that’s not going to disrupt on-the-ground operations.”
Annatoyn said he expects Justice Department lawyers with active cases to file a flurry of motions asking for extensions in ongoing cases. Depending on how long the government is closed, it could impede the court system’s ability to function.
Oil and gas developers with projects underway could have trouble contacting federal employees about needed changes to their operations plans.
“Precisely because federal agencies are so sprawling and at the moment a bit starved of institutional expertise and a full roster of politically appointed leadership,” Annatoyn said, “you could see offices here and there that are not responding to those types of requests as you might expect.”
On Monday, the Department of Energy said in a statement that Trump is “committed to keeping the government open and continuing to put the American people first.”
The shutdown also could further delay a broad DOE review of projects that had been expected by the end of the summer. The department did not respond Tuesday to a request for comment on the review, but it could affect hundreds of millions of dollars in grants and awards.
Reporter Christa Marshall contributed.
