Biden expected to strengthen federal regulations, reduce oil and gas leasing

Nov. 16, 2020

Specialists sorting through the implications of a Joe Biden presidency anticipate tougher federal regulations for the oil and gas industry and possibly some outright barriers to much activity on federal lands.

A big question is how far and fast Biden will go—or legally can go—toward fulfilling promises to halt new oil and gas leasing and hydraulic fracturing on federal lands, onshore and offshore. For a start, there could be a leasing moratorium, according to the specialists who talked to the Oil & Gas Journal.

Dramatic legislation to address climate change or amend the Clean Water Act are not expected now that Republicans appear likely to retain a majority in the Senate, although final totals for Senate seats await two Georgia runoff elections Jan. 5. But stricter controls on methane, a greenhouse gas, are anticipated regardless, by way of revisions to air regulations.

Leasing...or not

Biden promised a leasing ban. Existing leases are protected by law, so it would be a ban on new leases. It will depend in part on what is allowed by the Mineral Leasing Act, the Outer Continental Shelf Lands Act, and the Federal Land Policy and Management Act, all of them written to allow the orderly development of natural resources.

“If there’s a leasing or permitting ban, you’re going to see litigation,” said Dan Naatz, senior vice-president of government relations and political affairs at the Independent Petroleum Association of America (IPAA). He suggested the legal prospects are uncertain, but that meanwhile a temporary halt could hurt.

“We are very concerned about, if not an outright ban, that there will be a moratorium on leasing,” he said.

A Biden administration could issue a moratorium while studying the issues. The relevant federal laws do not seem to allow no leasing at all, but a moratorium and study certainly could slow things down, said Corinne Snow, a Vinson & Elkins attorney who has been chief of staff in the Environment and Natural Resources Division of the Justice Department.

One of the most unusual issues is the Arctic National Wildlife Refuge. A 2017 law mandates leasing there before the end of 2021. But it is common for federal agencies to overshoot mandated deadlines, get taken to court, and then negotiate a settlement involving new deadlines, Snow said.

The settlement deadline, too, may be missed, and more negotiation may ensue. The strategy “doesn’t buy you endless time” but it does delay, she said.

Bans could hit states

Federal land is especially important for oil and gas production in New Mexico, Wyoming, Utah, Montana, and North Dakota. In late October, the New Mexico Oil and Gas Association laid out potential impacts.

“Regardless of what it is called—a federal leasing ban, a federal fracking ban, or a federal permitting ban—the result is devastating for New Mexico,” the group said.

“The oil and gas industry is the greatest economic contributor to the state of New Mexico, supporting more than 134,000 jobs and $16.6 billion in annual economic activity. Taxes and royalties from the industry account for 39% of the State of New Mexico’s annual budget, including over $1.4 billion for public schools,” the group said.

Existing leases would continue to produce oil and gas if new leases were blocked, but the fields would be drained down, their output declining with depletion.

Back to Obama rules

In general, regulatory approvals, if given, likely will be slower and costlier under a Biden presidency while reverting to much of what the Obama administration established, especially for air emissions, the specialists said.

The reshaping of regulations is slow work. Snow has been telling people, “I don’t think the sky is going to fall in the first year. The agencies are going to have to pick their priorities. They’re going to have to invest a lot of time and resources.”

When agencies try to change a lot of rules at once, and especially when they try to do it quickly, things get missed, making them more vulnerable to court challenges, she said.

There are ongoing court fights over the Trump’s regulatory changes. A Biden administration could stop defending the government in those cases, but it tries to avoid that strategy, because the Justice Department does not like to confess error, Snow said, adding, “It does happen, but not often.”

More likely is that the government will ask for stays of court cases while new regulations are written, as the Trump administration did in some cases, she said.

Snow suggested Biden might not want to pull back the changes made by his predecessor to National Environmental Policy Act (NEPA) regulations, because NEPA regulations are such a problem for infrastructure projects of all kinds, and that will include infrastructure for renewable energy generation and transmission.

But IPAA’s Naatz was doubtful. “I think we will see a rollback in the NEPA area,” he said, describing the law as “a problem for everyone” but a pillar of the environmental movement.

Trouble for pipelines

A Biden administration can be expected to make it slower and costlier to win permits for oil and gas pipelines, said Marc Hildenbrand, an energy specialist at environmental permitting company Dawson & Associates and a former colonel in the US Army Corps of Engineers, the agency tasked much pipeline permitting.

“What he’s going to say is, let’s have more review than we do now,” Hildenbrand said.

More review, especially on environmental issues, can introduce more complexity, which takes more time and money and can allow more litigation, and at some point companies give up, he said. In reviews, “there’s almost an endless series of questions you could ask,” he said.

Biden has said he wants to kill the Keystone XL Pipeline plan. Hildenbrand said presidents have a lot of power, and certainly Biden can slow down the line, but that did not necessarily mean the line could be flatly blocked.

In the short term—such as the next 4 years—construction of wind farms and solar arrays can’t occur fast enough to undercut the need for natural gas, Hildenbrand said. The idea of eliminating carbon emissions from electric power by 2035, as proposed by Biden, also struck him as unrealistic.

Biden “seems like a very pragmatic guy to me,” Hildenbrand said. Sometimes election rhetoric is not what guides policy in office, he said, but then he added, “I might be proven wrong about that.”