Biden’s first 100 days: interior sends ‘clear signal’ for wind, targeting oil and gas
Just over 100 days after President Joe Biden took office, the US Department of the Interior has already taken several steps to implement its climate and clean energy policies, while also targeting the sector. fossil fuels.
As part of Biden’s series of climate and energy-related executive orders, he called on the Interior to suspend new oil and gas leases on federal lands while the agency reviews the program, a move that quickly drew condemnation from industry and many Republican lawmakers. . Biden also canceled a necessary presidential permit for the Keystone XL pipeline and asked Interior to help develop 30 GW of offshore wind generation by 2030.
“The green lighting and the accelerated wind and the slowing down or shutting down of oil and gas by the same agency sends a pretty clear signal,” said Kevin Book, managing director of research firm ClearView Energy Partners. “You kind of get a message, and I think that message will be important for the investment.”
The interior has always played a “critical role in energy production,” but the Biden administration appears to be taking an even “more refined” approach in using the agency to advance its energy goals than the Obama administration has. said Kelly Johnson, partner at Holland and Hart law firm.
“A lot of people in the Home Office… have a lot of history in the agency,” Johnson said. “They know the different offices, they know the statutes, they know the people who work there. They are therefore well placed to come and implement a program, at least on the production side. “
“ More bark than bite ”
So far, the Biden administration’s decisions on fossil fuels have not dramatically changed the outlook for U.S. oil and gas producers, said Ash Singh, head of supply analysis and of production at S&P Global Platts.
“There has been more barking than biting from this government,” Singh said.
Drillers rushed to get federal permits ahead of the November 2020 election and January inauguration, and permits continued for current leaseholders. More than 500 permits have been issued since Interior’s Jan.27 order suspending lease sales, which is on par with previous years, Singh said. Operators hold nearly two years of permits for undrilled wells.
“They were well prepared if there was a federal drilling ban on the first day of this administration,” he said.
Singh said he did not expect the Biden administration to make the leasing moratorium permanent, noting that lease sales could restart in the second half of the year, although perhaps be less frequently and under more scrutiny than in the past.
The rental moratorium could reduce U.S. land production by 1 to 1.2 million bpd over the next five years, while risks to land production will not manifest for at least 10 years, Singh said . Platts Analytics expects U.S. oil production to increase by 200,000-300,000 b / d in 2021 and 1 million b / d in 2022, but it will not reach its pre-pandemic peak of 12.8 million. b / d before at least 2023.
Cause of concern for industry
The Independent Petroleum Association of America, however, is “very concerned that the temporary hiatus is turning into a permanent ban,” said Dan Naatz, executive vice president.
Although the drillers operate on existing leases, Naatz said, they are unable to start the long process of aligning all the parts needed for the new leases, which will create a “kink in the pipe” in a few moments. month.
“You have to have a long horizon,” he says. “Sometimes from when you acquire a lease to the start of exploration, not just production, it can take years.”
Naatz said regulatory uncertainty will keep some drillers completely away from federal lands and the Gulf of Mexico.
“It’s already difficult to operate on federal lands,” Naatz said. “But as you increase these regulatory hurdles, it’s really concerning that it’s really slowing down production and people leaving.”
Interior has not released a timeline for its review of the rental program and faces several legal challenges during the break. Courts tend to defer new administrations to hire new staff, review the actions of the previous administration and plan their way forward, “but that deference doesn’t last forever,” Johnson said.
“The longer this goes on, I think the more problematic it will be from a defensibility point of view,” she said.
Book noted that the Biden administration may seek to change what constitutes “available land” to help circumvent the Mineral Leasing Act requirement that the Interior hold quarterly rental sales. The agency could also “make the economic opportunity less attractive” by shortening the terms of federal leases, implementing higher royalty rates and rents, or changing the terms of leases – all of which serve to reduce the cost of leases. use without terminating the lease entirely, he said.
“When we look at federal lands, the question is how far it goes to end the tenancy,” Book said. “Even the substantial reduction in leasing would be a very significant change.”
Offshore wind sees the action
Changes are also coming for the offshore wind industry. In January, Biden asked Interior to draw up a plan to double offshore wind production by 2030. At the end of March, he launched a series of coordinated actions to foster the development of 30 GW of offshore wind by. the end of the decade.
The Biden administration also quashed a Trump-era legal opinion limiting Interior’s ability to approve offshore wind projects, offering a broader interpretation of the law. And it recently completed its environmental review of the Vineyard offshore wind project, an 800 MW wind farm project that the developers want to commission in 2023.
Wind industry advocates have praised Biden’s policies, touting the regulatory certainty these actions have created.
“Creating a stable political platform for offshore wind development and facilitating the first wave of major projects will bring certainty to the industry, strengthen the workforce and revolutionize business chains.” national supplies along the coasts and across the country, ”American Clean Power Association CEO Heather Zichal said in a March 29 statement. “Now is the time to seize this once-in-a-generation opportunity.”