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How President Biden’s Executive Orders Impact The Oil Industry

Robert Rapier's picture
Proteum Energy

Robert Rapier is a chemical engineer who works in the energy industry. Robert has over 20 years of international engineering experience in the chemicals, oil and gas, and renewable energy...

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  • Feb 4, 2021
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In late 2019, as various candidates jockeyed to win the Democratic nomination for president, Elizabeth Warren made the statement that she would “ban fracking everywhere.” It was just the kind of hollow campaign promise that I loathe, and I explained why that was an unrealistic promise.

Then Joe Biden came along and pandered to the same crowd Warren was trying to impress. He promised “no new fracking”, but once again I explained why that promise wouldn’t be fulfilled.

Now that President Biden has issued a pair of executive orders that are viewed as hostile toward the oil and gas industry, many people have asked me whether Biden has in fact banned fracking.

On his second day in office, President Biden signed Executive Order on Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis. The biggest takeaway from the Executive Order was the cancellation of the Keystone XL pipeline permit. The project had been rejected by President Obama in late 2015, fast-tracked by President Trump in 2017, and now once more rejected by President Biden in 2021.

But there is no mention of fracking in this executive order.

Last week the administration also issued Secretarial Order No. 3395, which implemented a 60-day suspension of new oil and gas leasing and drilling permits for federal land and water.

This week President Biden followed that action up with Executive Order on Tackling the Climate Crisis at Home and Abroad. The biggest takeaway from this order was an indefinite “pause on new oil and natural gas leases on public lands” until a comprehensive review on the climate change impacts can be completed.

The sound bite for many from this executive order was that President Biden had banned fracking as a consequence of this action. But as with the previous order, fracking isn’t mentioned in this executive order. Further, if an operator has an existing lease and permit but haven’t drilled yet, they can still drill the well and frack it.

The order does potentially impact some future fracking operations, but Biden did reiterate before he signed it “Let me be clear, and I know this always comes up, we’re not going to ban fracking.”

But what Biden can’t do by executive order is an overall ban on fracking, because most fracking takes place on private land. A complete ban would have to be passed by Congress, and that looks like a longshot.

For a more in-depth interpretation of Biden’s recent executive orders, I spoke with Stacey Morris, who is Director of Research for midstream index and data provider Alerian. She explained that the orders were certainly not as bad as they seemed:

“These executive orders were pretty well-telegraphed. They were even a little bit softened from what was said during the campaign. The language on the Biden website discussed banning permitting on federal land. The executive order is a pause on new leases. They aren’t looking at a full out fracking ban.”

When I asked how companies might be affected, she explained “Companies have been stockpiling permits in anticipation of a move like this. Right now there are 7,700 unused permits. Devon Energy, for example, has over four years of permit backlog and drilling inventory. They expect to be able to execute on their federal lands program based on comments made in November.”

She added that some states that could be most impacted longer term are New Mexico, Wyoming, North Dakota, and Colorado. In the long run, she said that a ban on drilling on federal land could lead to more imports. In that case we could end up using oil that is produced with more associated carbon emissions than if it had been produced in the U.S.

I remarked that President Biden seemed to be going further left than President Obama on these issues, and she said that is probably because climate change is widely viewed as a more pressing problem now. Hence, Biden feels compelled to pursue more aggressive actions.

She said that the bottom line is the bark was worse than the bite: “The headline looks scary, but we don’t see any immediate impact from these executive orders.”

For those who are worried about your gasoline prices going up, this is definitely not the reason.

Originally published here. 

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