Just hours after his inauguration ceremony, the new US President issued a series of executive orders reversing hallmark policies of the Trump administration.
One of these policies that has been in the line of fire since day 1, is Trump’s oil legacy. Within hours of becoming president, Joe Biden signed an executive order to return to the global Paris Agreement on tackling climate change. It is the agreement that was abandoned by the Trump administration, which had largely been a champion of the oil industry and wanted to advance oil projects to achieve US energy independence.
Biden’s decision to rejoin Paris Accord was hailed by world leaders, environmental activists and even leaders of the oil industry. However, some other executive orders that for example aimed at reducing methane emissions from the oil and gas sector; banning drilling in the Arctic Refuge; and cancelling permits for the Keystone XL oil pipeline from Canada, had consolidated fears of the oil industry in the US that they should be ready for more consequences of Biden’s policies on their future.
Targeting Fossil Fuel
The recent fast developments of Biden’s policies towards fossil fuel proved that the sector’s fears are more than justified.
One of the latest developments was the signing of a raft of executive actions to combat climate change, including pausing new oil and gas leases on federal land and cutting fossil fuel subsidies.
Biden administration also announced the suspension of new oil and gas leasing and drilling permits for US lands and waters for 60 days as part of a broad review of programs at the Department of Interior.
Biden’s campaign had already pledged to halt new drilling on federal lands and end the leasing of publicly owned energy reserves as part of his plan to address climate change.
The recent moves by the Biden’s administration drew criticism from the oil industry’s main trade group, the American Petroleum Institute, which said limiting access to publicly owned energy resources would mean more foreign oil imports, lost jobs and fewer tax revenues.
“Impeding American energy will only serve to hurt local communities and hamper America’s economic recovery,” the petroleum institute President Mike Sommers said in a statement.
Sommers went further to elaborate that without access to energy development on federal lands and waters, US energy supply would shift to foreign sources, cost nearly one million American jobs, increase CO2 emissions and reduce the revenue that funds education and key conservation programs.
Some experts see that the impact of the decision to halt leasing permissions could be blunted by companies that stockpiled drilling permits in the closing months of the Trump administration.
Around 1,400 permits on federal lands were approved over a three-month period that included the election. Those permits are supposed to allow companies to continue drilling for years, potentially undercutting Biden´s climate agenda. However, there are fears that the pause could soon become a long-term ban.
Biden’s policies also included directions to federal agencies to “eliminate fossil fuel subsidies as consistent with applicable law.” Biden also said he would ask the Congress to end subsidies through legislation. He also gave orders to establish climate considerations as an essential element of US foreign policy and national security.
He also set a goal to conserve 30% of federal land and waters to protect wildlife by 2030 and seek to double renewable energy production from offshore wind, also by 2030.
The new directions, which were cheered by environment groups, were also disapproved by the industry leaders who warned of dire economic and social consequences that will affect jobs and energy security.
The new tendency by the US administration added insult to injury for US oil companies which was hit hard in 2020, when oil prices were affected by the pandemic and an epic price war that amplified the glut, causing the oil industry to nearly run out of room to store all the excess barrels.
That unthinkable hit caused US oil to crash below zero for the first time in history. Many oil companies were left with no option rather than slamming the brakes on production and rapidly cutting jobs.
According to an analysis published by Deloitte, around 107,000 jobs vanished from the US oil, gas and chemicals industry between March and August 2020. It was the fastest rate of layoffs in the industry’s history — and it does not even include the untold number of people taking pay cuts.
The new environmental agenda casts a shadow over the companies’ ability to regain these jobs any time soon.
Biden’s policy towards fossil fuel was very clear since his early electoral campaign, when his campaign even refused donations from executives of fossil fuel companies.
However, many experts thought that Biden’s agenda for fossil fuel is easier said than done, citing the hardship he will face to get legislation pass through highly divided congress where Biden is expected not only to find opposition of the Republicans but even from fellow Democrats representing oil-producing states.
Instead, experts suggest that Biden is likely to find support for a clean electricity standard that depends more on natural gas and increasing low-carbon energy spending on areas like carbon capture or energy storage.
New Test of Persistence
However, Biden seems to be determined to take bolder actions to deal with climate crisis insisting that “we have already waited too long to deal with this climate crisis,” noting the threats the US faces from intensifying storms, wildfires and droughts are linked to climate change.
“This is a case where conscience and convenience cross paths, where dealing with this existential threat to the planet and increasing our economic growth and prosperity are one and the same. When I think of climate change and the answers to it, I think of jobs,” Biden added in a recent White House event.
Oil companies are still waiting for the international climate summit that Biden will hold on Earth Day April 22 to announce a target for reducing its greenhouse gas emissions by 2030 under the Paris climate accord, which may bring more restrictions on fossil fuel production.
While Deloitte analysts urged oil and gas companies to embrace sustainability as a way of business and use the pandemic as a wake-up call to decarbonize their work, the new targets set by the Biden administration may accelerate this transition.
However, some see this transition will not be easy as many oil, gas and chemical companies are ready to fight for survival.