Assuming that the various challenges being filed by President Donald Trump this week to election results in several states fail and Democrat Joe Biden does become the next President of the United States, the potential impacts to the oil and gas industry in the U.S. would be numerous and severe. While only one significant oil and gas-related issue was raised to high prominence during the general election campaign – Biden’s promises to ban hydraulic fracturing at various times and levels – it is a mistake to assume that that would be the only way in which a Biden/Harris Administration would impact the industry.
The first tranche of impacts will come in the form of executive orders. Like the Obama/Biden presidency before him, a great deal of President Trump’s energy-related policy has been enacted via executive orders. The obvious vulnerability of any executive order is that it usually can be easily reversed by a successor in office. Thus, the most immediate impacts of a Biden presidency will come in the form of efforts to increase regulation on the energy industry via the reversal of various Trump executive actions. Biden and Harris repeatedly promised to take these actions throughout their campaign, so we should expect a quick follow through on what amounts to low-hanging fruit.
Those likely executive order reversals include:
· Re-entry of the United States into the Paris Climate Accords;
· Re-entry of the United States into the Obama-era Iran deal, which would free up Iran to dramatically increase its exports and potentially impact crude prices;
· Trump’s order to end the Council on Environmental Quality’s guidance that all federal permitting decisions and NEPA reviews must consider climate change impacts;
· Trump’s order to disband the Interagency Working Group on Social Cost of Greenhouse Gases;
· Trump’s various orders designed to eliminate delays in federal permitting processes.
We can also expect a Biden presidency to follow through on his promises to ban hydraulic fracturing on federal lands and waters, which represent a very sizable percentage of overall U.S. oil and gas production. This can be accomplished by an order from either a President Biden or from his future Secretary of the Interior, although we should also expect Interior to follow up and attempt to frame it in the form of regulations in order to make it more of a permanent change.
It is also important to remember that Sen. Kamala Harris promised to eliminate hydraulic fracturing entirely in the U.S. repeatedly during her own presidential effort in 2019, and never really backed off of that promise during the general election campaign as Biden’s running mate. On the few occasions when she was asked about it, she was always very careful to say that “Joe Biden will not ban fracking,” and no more than that.
Given that Biden would be 78 years old on inauguration day, threats to the continuation of legal fracking in the U.S. could rise considerably if he were to become unable to finish his term.
Then there would be the Biden/Harris regulatory agenda. A Biden/Harris administration is very likely to pursue a regulatory agenda that will look a lot like the aggressive agenda taken up during the 2nd term of the Obama/Biden presidency. As we saw from 2013 through 2016, the executive branch has many regulatory tracks to pursue to limit the oil and gas industry, including not just the Department of Interior, but also the Environmental Protection Agency and OSHA, all of which can significantly raise costs in the oil and gas sector and slow the ability to complete major projects.
The Federal Energy Regulatory Commission (FERC) also has the ability to slow the midstream sector considerably by slowing and obstructing the development and completion of major new interstate pipeline projects. Democratic governors like Andrew Cuomo have had great success in obstructing new pipeline projects from crossing through their states; obviously, a reconstituted FERC would possess far greater power to obstruct the installation of critical new infrastructure.
Finally, we should remember the key roles various federal agencies play in the permitting and authorization of major industry-related facilities, such as LNG export facilities, refineries and the expansions of shipping ports. Agencies involved in these areas include the EPA, the Department of Commerce, the Department of the Interior, the U.S. Army Corps of Engineers, to name a few.
So, while a ban on fracking consumed the headlines during the general election campaign, a new administration has many avenues available to slow a domestic oil and gas business that is already struggling with the impacts of the COVID-19 pandemic. The next four years should bring about tremendous job security for regulatory compliance experts within oil and gas companies.