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Analysis: Biden's climate change orders fast and furious, but lasting change will be harder

CommoditiesJan 28, 2021 06:01PM ET
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2/2 © Reuters. FILE PHOTO: Democratic 2020 U.S. presidential candidate Biden walks past solar panels in Plymouth 2/2

By Timothy Gardner and Jessica Resnick-Ault

WASHINGTON (Reuters) - U.S. President Joe Biden made quick work signing a slew of sweeping executive orders targeting climate change that ranged from freezing federal oil and gas leasing to eliminating the fossil fuel industry's lucrative subsidies.

But making these moves permanent and powerful enough to help his administration achieve its goal of a zero-emissions economy by 2050 will be tough, grinding work, requiring big battles with Congress and industry.

It also raises the stakes for the energy industry, which has benefited from the last decade's shale revolution to turn the United States into the world's biggest producer of oil and gas and reduce its dependence on foreign energy sources.

While executive orders can make a splash in the opening days of a presidency, they can be vulnerable to lawsuits and be reversed by a future president if not backed up by legislation.

Already, one independent oil group has sued the administration, and the nation's leading oil lobby is taking a defensive stance.

"We pledged to work with (Biden's) administration when we can and oppose when we must,” said Mike Sommers, president of the American Petroleum Institute, in a speech on Thursday. “Only eight days into his term, it is disappointing to report that we find ourselves in a posture of strong opposition. But we have no choice."

Biden this week signed a batch of executive orders on climate change that included directing the Interior Department to pause new leasing for drilling on public lands and waters that account for about a quarter of U.S. oil and gas production.

The orders also directed federal agencies to ditch fossil fuel subsidies "as consistent with applicable law," potentially including ones worth tens of millions of dollars a year for research handled by the Energy Department. Biden also called for ditching some $40 billion in subsidies in the annual budget, a more difficult task to accomplish. That came after his move to cancel a permit for the long-gestating Keystone XL oil pipeline from Canada.

Those orders triggered cheers from environmental advocates and an outcry of opposition from the oil industry, but the administration's ability to follow through on them with lasting changes that advance the fight against climate change will depend on the decisions of judges and lawmakers.

Republican senators from oil-producing states introduced legislation on Thursday to block the order pausing new leasing.

Pushing Congress to act on Biden's agenda could prove difficult with Democrats having only a small majority in the House and the slimmest majority possible in the Senate at 50-50 with Vice President Kamala Harris having the tie-breaking vote.

Industry groups like the Independent Petroleum Association of America said they are meeting with senators from fossil-fuel producing states, including Joe Manchin of West Virginia, a Democrat, and others from Western states to protect themselves against drilling bans and the elimination of tax breaks.

"We want to keep that dialogue going and just really try to hold the administration’s feet to the fire," said Dan Naatz, an IPAA lobbyist.

Since 2010, Manchin, the incoming head of the Senate Energy and Natural Resources committee, has pushed for bipartisan climate measures, but opposes provisions in the Green New Deal, a package of environmental initiatives favored by many Democrats.

Manchin said on Wednesday that Biden's leasing pause is "prudent to evaluate if taxpayers are receiving a fair return for the use of their resources," given the high percentage of leased acreage that industry leaves unused.

Some of Biden's own party members raised concerns. Four Texas Democrats in the U.S. House urged Biden in a letter on Wednesday to retract the leasing pause, saying he should "reject policies that would ban responsible oil and gas leasing on federal lands and federal waters."


Even without Congressional support to make the leasing suspension permanent, the Biden administration could find other ways to restrain drilling in the long-term.

"There are ways to do it subtly and send messages to the industry that it is going to be more difficult," said a Houston-based energy lawyer, speaking on condition of anonymity.

The Interior Department, for example, could modify terms on leases, including royalty rates, minimum bids and provisions adjusting time frames on production "so as to make leases financially unattractive enough that producers might be disinclined to pursue them even if sales were to resume," analysts at ClearView Energy Partners, a nonpartisan research group, said in a note.

Safety rules on offshore drilling rigs set during the Obama-era could be reinstated and slow permitting or add costs to expensive oil and gas production techniques. Biden's Environmental Protection Agency could issue new water or methane venting standards on drilling on federal lands that could boost costs.

The Western Energy Alliance, a group of 200 companies aligned with drilling in the U.S. West, filed a lawsuit after Biden signed the executive orders, saying pausing leasing would violate laws, including the Mineral Leasing Act, and result in $33.5 billion in lost GDP in his first term.

Biden "cannot simply ignore laws in effect for over half a century,” said Kathleen Sgamma, president of the Alliance.

The United States produces roughly 11 million barrels of oil per day. Rystad Energy analysts estimate the lease suspensions, were they to continue, would restrain production by roughly 400,000 bpd by mid-decade.

Ryan Flynn, executive director of the New Mexico Oil and Gas Association, a trade group, said the petroleum industry is anxious about the drilling pause.

"There is a fear that it will not only have an impact today but will freeze decision-making for decades ahead," he said.

Analysis: Biden's climate change orders fast and furious, but lasting change will be harder

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Comments (4)
Red Riley
Red Riley Jan 28, 2021 10:12PM ET
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biden blah blahblah
Casador Del Oso
Casador Del Oso Jan 28, 2021 6:54PM ET
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Trump was scorned because of his attitude. Biden will be scorned because of all the money he is costing the American public.
Alan Rice
Alan Rice Jan 28, 2021 6:39PM ET
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Take note of the businessmen that oppose the new Administration's Earth First "climate"(Earth Biosphere Gutting) Plan. They would sell Earth for scrap if it would pay for a 2021 Tesla. (Note the names for the 2020 Midterm Elections.) And what is YOUR position ?? Tic toc.
Kelly Mayer
Kelly Mayer Jan 28, 2021 6:17PM ET
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#illegitimateBiden can do whatever he wants, until replaced with Kamala.
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