SHIFTING POLITICAL CLIMATE
Biden administration policies could have big impact on energy companies
President Joe Biden has put his team to work reviewing dozens of actions taken by former President Donald Trump, aiming to reverse orders he says harm the environment or endanger public health.
For the energy and auto industries, the impact could be far-reaching. Biden aims to reduce harmful emissions from cars, trucks and sport-utility vehicles.
Oil and gas operations are being scrutinized as well — from how companies extract resources from the ground to the safety of pipelines that distribute the fuels. The new president aims to transition the country to 100% renewable energy for electricity generation by 2035 and so-called net-zero emissions in the overall economy by 2050.
His campaign website promises to develop “rigorous” new fuel economy standards and eventually to make all light- and mediumduty vehicles electric, though it provides no time frame for doing so.
During his campaign, Biden also spoke about restricting oil and gas drilling on federal lands and reducing methane emissions from oil and gas operations.
Many experts say Biden’s actions could help the nation achieve ambitious climate goals and boost the renewable energy sector, driving job growth. Others say they worry more that stricter regulations could hurt companies struggling to recover from the coronavirus pandemic, which crippled demand for fuel.
Hours after his inauguration Wednesday, Biden directed federal agencies to immediately review regulations and executive actions taken in the past four years that threatened public health or the environment.
Ultimately, his success will require surmounting opposition in the energy industry as well as in Congress.
“Yes, we have a blue wave, but it’s a pretty thin wave, with a 50/50 split in the Senate,” said Stewart Glickman, senior equity analyst for the firm CFRA Research. “Still, this is the first presidency that is actively trying to discourage fossil fuel development while promoting renewables.”
Here is a look at some energy issues Biden plans to tackle:
Methane leaks
Methane — the main component of natural gas — frequently leaks from oil and gas wells and pipelines. As it does, it exerts a powerful warming effect on the atmosphere. Methane accounted for 10% of the nation’s greenhouse gas emissions in 2018, according to the U.S. Environmental Protection Agency.
And the oil and gas industry produced nearly 30% of the country’s methane emissions.
Under former President Barack Obama, oil and gas operations were required to inspect equipment built or modified after 2015 twice a year for methane leaks and fix leaks that they found. Trump weakened those rules.
Now, Biden is expected to restore Obamaera methane regulations. He might also extend those requirements to those older wells, which could put some operators out of business.
“Texas’ Permian Basin is one of the largest sources of methane emissions in the world,” said Emma Pabst of the advocacy group Environment Texas. “Reinstituting these rules will have a significant impact on our state’s climate and environment. Requiring oil and gas companies to address methane leaks along the production line sends a clear message that our Environmental Protection Agency is no longer giving out free passes to pollute.”
Trump’s decision to loosen methane regulations was opposed even by BP, Chevron Shell and ExxonMobil and other major oil and gas companies because they had invested heavily to reduce methane emissions. If Biden were to just reverse Trump’s rule and restore Obama’s methane regulations, it would have little impact. That’s because many big companies already tightened their methane leak prevention techniques.
But Biden could extend the methane regulations to older wells. That worries independent producers, especially those that operate “stripper wells” that produce just a barrel or two of
oil a day, that the expense of controlling methane leaks could put them out of business.
Auto fuel economy
The new administration intends to undo one of Trump’s biggest changes: the gutting of Obama-era fuel economy and greenhouse gas emissions standards for automobiles through 2025.
But the regulatory slog could take a couple of years unless Trump’s rollbacks are thrown out by the courts.
Biden also is likely to reverse Trump’s decision to revoke California’s ability to set its own pollution standards.
David Friedman, a former acting administrator of the National Highway Traffic Safety Administration, one of the agencies that sets such auto standards, said he thinks it will take until the 2023 model year for stricter standards from Biden to take effect.
The Trump administration cut Obamaera standards for model years 2021 to 2025 from 4.7% annual fuel efficiency gains to 1.5%, weakening one of the nation’s biggest efforts to fight climate change. Trump’s stance was that the changes would make cars more affordable and safer. Both points were disputed by environmental groups.
The rollback largely was supported by the auto industry, though Ford, BMW, Volkswagen, Honda and Volvo backed California for what amounted to 3.7% annual fuel efficiency increases. Many in the industry think the agreement with California is where bargaining will begin with the Biden administration.
Automakers have long maintained that they would have trouble meeting Obamaera standards if they aren’t rolled back. The industry has said it supports increased standards but that, because people are buying less-efficient SUVs and trucks, it would have trouble reaching the Obama numbers. Last year, 76% of the new vehicles sold in the United States were trucks and SUVs.
During the 2019 model year, 11 of 14 major automakers had to rely on regulatory credits because they didn’t meet standards, according to EPA figures. Gas mileage declined, and pollution went up in 2019 for the first time in five years.
Federal drilling bans
Biden has directed the Interior Department to halt all leasing for oil and natural gas exploration in the Arctic National Wildlife Refuge. He also ordered a 60-day moratorium on new oil and gas leasing and drilling permits on federal land as part of a review of Trump-era rules that were designed to accelerate such activity.
Some energy analysts said the moratorium could be just the first step in a much larger agenda to end drilling on federal land that “could give way to emergency suspension that lasts much longer, essentially ending lease sales,” according to Kevin Book, managing director of Clearview Energy Partners.
Biden could, for example, declare a climate emergency, rewrite land-management rules, slow permitting or make leases less financially attractive.
Oil industry leaders said that restricting development on federal land might lead the United States to import more oil.
“All a leasing ban will do is shift production to Saudi Arabia and Russia, which have far less-stringent environmental controls than American producers,” Naatz said.
Pipelines
Among his first executive orders, Biden revoked the permit for the Keystone XL pipeline, the 1,700-mile pipeline that was to carry oil from Alberta, Canada, to the Texas Gulf Coast. Keystone XL began shutting down construction, and the company said it would eliminate more than 1,000 jobs in coming weeks.
The pipeline had been a symbol of struggle between the goals of preserving jobs and curtailing global warming. Trump had presided over an expansion of the nation’s oil and gas pipeline network. But legal setbacks chipped away at his progress.
Environmentalists and Native American tribes had opposed the pipeline, arguing that new infrastructure for fossil fuels would worsen climate change.
The American Petroleum Institute assailed Biden’s actions on Keystone as a step backward that would hurt union workers.
“Pipelines are the safest, most environmentally friendly way to transport energy, and the economy cannot recover at full speed unless we deliver reliable energy from where it is to where it is needed,” said Mike Sommers, the lobby group’s chief executive officer.
Preventing blowouts
The president directed the Interior Department to review rules that are designed to prevent blowouts on offshore oil rigs. The Obama administration had adopted safety measures after the BP Deepwater Horizon disaster that killed 11 and spilled 134 million gallons of oil into the Gulf in 2010.
After Deepwater Horizon, Obama required companies to test blowout preventers — which are designed to seal a well in case of a blowout — every 14 days. Trump relaxed that standard to every 21 days.
But deep-water exploration has expanded in recent years even as safety inspections declined.