Oil-and-gas industry prepares legal challenges to Biden

It vows to take the president-elect to court on leasing and pipeline-infrastructure bans. But he has other options at his disposal to stifle production.

The Arctic National Wildlife Refuge
Alexis Bonogofsky for USFWS
Nov. 15, 2020, 8 p.m.

The oil-and-gas industry is laying the groundwork to fight off executive action under President-elect Biden.

That looming battle is likely to be waged most prominently in the courts. And oil and gas backers are bullish that they can win against the Biden proposal that generated some of the most heated debate on the campaign trail: a ban on new leases on federal lands.

“Flat-out, the president does not have the authority to just ban leasing and development on federal lands. So if President-elect Biden goes that route, we would be in court within hours or days,” said Kathleen Sgamma, president of the Western Energy Alliance, which represents oil and gas producers.

“We would get a preliminary injunction and we would ultimately win,” she said. “It’s that clear-cut.”

The Mineral Leasing Act, signed into law in 1920, instructs the federal government to lease public lands for resource development. The Outer Continental Shelf Lands Act of 1953 does the same for offshore areas. And the 1976 Federal Land Policy and Management Act, which came in the footsteps of the Arab oil embargo, requires multiple uses of public lands, including resource development.

But oil and gas stakeholders admit that the Biden administration is likely to pursue moratoriums for leasing and pipeline permitting, as well as other fossil-fuel infrastructure, in a more strategic and nuanced way that could potentially survive in court.

On Day One of his presidency, Biden has vowed to rejoin the Paris Agreement climate accord. The U.S. became the first country to withdraw from the pact on Nov. 4, after Trump initiated the process three years ago.

And Biden has indicated he will issue a suite of climate-related executive actions after moving into the White House. Alongside a ban on new oil and gas permitting, the president-elect is vowing to “require any federal permitting decision to consider the effects of greenhouse gas emissions and climate change.”

He’s pledging to ban leasing in Arctic National Wildlife Refuge and Alaskan waters. Oil and gas stakeholders also expect Biden to deploy the Antiquities Act, the statute used to create national monuments, to protect more public lands.

Environmental groups continue to fight the Trump administration in court over the president’s 2017 executive order, and ensuing regulatory action, to strip protections for the Bears Ears and Grand Staircase-Escalante monuments in Utah.

Meanwhile, Biden could strengthen offshore safety and pollution-control regulations put in place in the wake of the Deepwater Horizon spill in 2010, which killed 11 people and wreaked havoc on Gulf of Mexico ecosystems and tourism. An offshore-pollution rule finalized by the Trump administration issued earlier this year ran into fierce resistance from environmentalists, who said it gutted an Obama-era proposal.

That array of measures would stifle development even without an outright ban.

“One of the things that’s really going to have an impact on the oil and gas operations are the reinstitution of a bunch of executive orders on climate change and federal decisions needing to consider greenhouse-gas impacts,” said Kelly Johnson, a longtime oil-and-gas attorney with Holland & Hart who served in the George W. Bush administration.

Unlike presidential action on national monuments, Biden’s executive orders on the climate and environmental-justice fronts would likely have to be followed up with regulatory action at the Environmental Protection Agency, the Interior Department, and other agencies.

Biden ran on the most ambitious climate-change platform in presidential history, vowing to put in place plans to zero out power-sector emissions by 2035 and deploy $2 trillion in climate investments over his first term.

Still, oil and gas producers courted Biden in the months leading up to the election. And the U.S. Chamber of Commerce is vowing to work with Biden on climate change. The American Petroleum Institute, which lobbies for fossil-fuel companies, is aiming—at least publicly—to find common ground on carbon-capture technology.

“America’s natural-gas and oil companies haven’t waited for governments to act on climate—we have driven progress through technology, innovation, and constant reinvention, and we’ll support bipartisan policies that build on that progress. We stand ready to work with members of both parties to forge those bipartisan solutions,” API President Mike Sommers said after news organizations first called the race for Biden on Nov. 7.

Despite the overtures from the oil-and-gas community, Biden’s potential moves to block key oil pipelines, like the long-stalled Keystone XL and Dakota Access, will likely ratchet up tensions after the president-elect takes office.

The coronavirus pandemic has hit the oil-and-gas sector hard, and it is poised to continue to do so for at least the near-term.

U.S. crude production is likely to decline to 11 million barrels a day until the second quarter of 2021, according to the Energy Department. In 2019, the U.S. produced an average of 12.2 million barrels per day.

Most projections indicate a rise in oil production after 2021 that will surpass pre-COVID levels. But analysts are signaling that global oil demand will peak at lower levels than previously anticipated.

That suggests less oil will ultimately be produced in the coming decades.

“There’s a structural decline for demand,” said Rob Smith, director of Global Fuel Retail at IHS Markit, a leading market-analysis firm. “Our current outlook is for peak demand to occur in the early to mid-2030s. However, that peak is now substantially lower than previously expected.”

Meanwhile, as the pandemic rages and the unemployment rate remains high, some oil and gas supporters are warning Biden that aggressive action on the industry could lead to more electoral losses for Democrats following a slew of Republican flips this cycle.

“There are a couple [of] moderate Democrats in Texas that are going to be concerned about super anti-energy moves by the administration. And they’re going to have to walk a little carefully unless they’re just writing off Congress,” said Kenny Stein, director of Policy and Federal Affairs for the conservative American Energy Alliance.

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