Biden’s plan to restrict drilling may help Texas
Expert says ban on federal lands could shift some capital from New Mexico to Texas
Fears that Joe Biden, if elected president, would upend the oil and gas sector and put thousands of people out of work in Texas aren’t grounded in reality, observers say.
The former vice president has been criticized for pledging to transition to renewable energy and to restrict drilling on federal lands, if elected.
The American Petroleum Institute estimated that Biden’s drilling ban could lead to 120,000 job losses by 2022. S&P Global Platts, meanwhile, said the proposal would trim about 1.1 million barrels per day of U.S. oil production by the middle of the decade.
But a ban on new drilling on federal lands might actually help Texas, said Rene Santos, manager for North America supply and production analytics at Platts.
“Biden’s pledge to restrict fracking on federal lands is actually fortunate for Texas because there are no federal leases in the state,” he said. “New Mexico, meanwhile, has relatively large plots of federal land, and we would expect some capital to leave (New Mexico) and move east into Texas.”
That, however, does not mean an end to drilling in New Mexico. Biden’s propos
al targets new drilling, not already-awarded leases. As recently as August, Devon Energy Corp. said it was expecting to secure more than 550 permits to drill on federal land in New Mexico by the end of the year. Even if Biden wins, Devon would presumably be allowed to drill on that land.
The other part of Biden’s energy proposal is a transition to cleaner sources, such as wind and solar. The plan also has been promoted as a jobs producer, with Biden saying millions of workers would be needed to build a clean energy economy. But fossil fuels won’t disappear anytime soon, said Ed Longanecker, president of the Texas Independent Producers and Royalty Association, a nonprofit advocacy group.
“We should remember that the real energy transition does not mean we are doing away with oil and gas,” he said. “The U.S. oil and natural gas industry will continue to be a key source of energy here and abroad for decades to come, despite some of the more extreme efforts to end the use of hydrocarbons.”
In part because ofmobility restrictions during the pandemic, the U.S. Energy Information Administration estimated that total global consumption of petroleum and related products last month was down 6.4 million barrels per day compared with September 2019, but up considerably in the third quarter when compared with the second quarter. Sentiment is changing, too, with the Federal Reserve Bank of Dallas estimating that oil supply might not be enough to meet demand perhaps as soon as late next year.
As the pandemic took hold in the U.S. during April, Sen. John Cornyn, RTexas, said he was “really worried that this is going to destroy, or at least permanently damage, a really important part of our economy in Texas and the United States.” As demand shriveled and production halted, the Texas oil and gas industry lost more than 50,000 direct workers, Longanecker said, and, while wind energy is a significant component of the power sector, its hiring is still relatively small.
With the slump in the oil and gas sector, meanwhile, there’s been a rush toward bankruptcy protection and consolidation, such as the multibillion-dollar deal Conoco made for Concho Resources this month. Such mergers would inevitably lead to redundancies in the shale oil patch, Santos said. Job cuts typically follow.
Most oil and gas workers would have a reasonable chance at finding work in a clean energy transition, said Manan Ahuja, manager for NorthAmerica power analytics at Platts.
“As renewables pick up, we would expect that bluecollar workers would be able to transition from the oil and gas sector into wind and solar jobs relatively quickly, given the right training,” he said. “That might not be the case for the engineers and other white-collar jobs without more advanced training and reskilling.”
Solar is emerging as an alternative energy option in the state. And some of the same land that’s attractive to drillers in West Texas also supports renewable energy.
“In general, renewables are getting cheaper and the labor pool in this part of the state is relatively inexpensive, so we’d expect a smooth transition,” Ahuja added.
Part of the malaise in the oil and gas sector is because of the pandemic, which has left deep scars on the global economy and may change how we go about our dayto-day lives in the future.
It’s inevitable that oil prices will move higher than they are now, demand will improve and activity in the U.S. shale patch will rebound, Santos said.
The mood, however, surrounding the proposed energy transition is sour, according to responses to questions posed by the Dallas branch of the Federal Reserve.
“A Biden administration would wreak havoc on our industry — way worse than OPEC. Itwould put us out of business,” one respondent wrote. “We could not survive a Green New Deal.”
Time, and the outcome of theU.S. election, will tell.