In the midst of a chaotic year and a tense campaign season, issues such as COVID-19, race relations, and healthcare seem to be at the forefront of Americans’ minds as they head to the polls on November 3. But the oil and gas industry stands to be impacted regardless of the election outcome in November, and those impacts will have wide-reaching effects on the U.S. economy, its energy independence, and its diplomatic relations. The 2020 Presidential candidates, Republican Donald Trump and Democrat Joe Biden, have divergent positions on U.S. oil and gas production, with the former pledging continued expansion of domestic oil and gas drilling and production, and the latter pledging to transition the U.S. away from its reliance on fossil fuels.
It is no secret that one of President Trump’s top priorities is to achieve U.S. energy independence and dominance. His America First Energy Plan is aimed, in part, at increasing fossil fuel production in the U.S. During his first term, his Administration took numerous actions to (i) actively roll back, repeal or streamline prior Administrations’ environmental policies and regulations, including those considered burdensome and restrictive by the oil and gas industry, and (ii) open up additional federal lands and waters for domestic drilling and production. Due to the sharp increase in oil and gas production, the U.S. became “energy independent” and a net exporter of petroleum products in 2019. If President Trump is re-elected, his Administration is expected to continue, and may even accelerate, these efforts in support of his America First Energy Plan.
By contrast, Former Vice President Joe Biden has pledged to pursue a “Clean Energy Revolution” by aggressively combatting global warming and climate change and lowering greenhouse gas emissions, radically overhauling the U.S.’s energy sector. Biden’s “energy” plan focuses largely on historic levels of public investment in clean and renewable energy sources and infrastructure (e.g., solar, wind, electric vehicles), reducing greenhouse gas emissions (primarily from the transportation, electricity and other industrial sectors), and curbing the effects of climate change. Biden has indicated that, if elected, he will seek to put the U.S. on an irreversible path to achieve a “100% clean energy economy,” with benchmark goals of doubling offshore wind production by 2030, de-carbonizing the electricity sector by 2035, and achieving net-zero emissions, economy-wide, by 2050.
While Biden’s exact position on oil and gas production could still use some clarification (he has flip-flopped at least twice on whether he is opposed to fracking), he does not advocate for a complete ban on the use of fossil fuels. As part of his plan to transition from fossil fuels to renewable sources of energy, Biden intends to offer research investments and tax incentives to accelerate the development of carbon capture and sequestration technologies (“CCS”), a process discussed in a recent blog post. If Biden is elected, his Clean Energy Revolution will mark a profound shift away from the production and use of fossil fuels in the U.S.
In addition, Biden’s campaign has outlined a number of plans and policies that, if implemented, would indeed affect the oil and gas industry. These include the following:
- Reverse all of President Trump’s de-regulatory policies and orders over the last 4 years, pledging to make such rules and regulations stronger than before;
- Eliminate all Industry subsidies for fossil fuels, the majority of which come in the form of tax deductions and incentives on royalty payment relief;
- Modify royalties to account for climate costs;
- Implement aggressive limits on methane pollution for new and existing oil and gas operations, which would likely impact the practice of gas flaring and require additional monitoring of methane emissions from wells, facilities, and pipeline infrastructure;
- Require all federal permitting decisions to analyze the effects of greenhouse gas emissions and climate change;
- Eliminate drilling in the Arctic National Wildlife Refuge and other federal lands and waters; and
- Institute protections for the Eastern Gulf of Mexico area.
However, it’s Biden’s proposed ban on new oil and gas permitting on federal lands and waters that would arguably have the most widespread effect on the oil and gas industry. If implemented, this would constitute a de facto ban on all new oil and gas drilling (which would necessarily include permits for fracking) and development, which could hamper oil and gas production across much of New Mexico, North Dakota and Wyoming, three of the nation’s largest oil and gas producing states, as well as offshore in the Gulf of Mexico, which produces 2.3 million barrels of oil and gas per day.
Given the current state of the U.S. economy in light of the COVID-19 pandemic, it may seem likely that Biden’s proposed Clean Energy Revolution would have an adverse effect on the oil and gas industry, but numerous commentators and analysts believe otherwise, with the exception of (i) generally increasing drilling costs and regulations and (ii) restricting new drilling on federal lands and waters. One common theme is that it will be the economy/market, not presidential policies, that will drive U.S. oil and gas drilling and production, at least in the near term. Another popular opinion is that both fossil fuel and renewable energy sources will play important roles in meeting the future energy demands of the U.S.
The 2020 election is less than two weeks away, and the stark differences between each candidate’s energy policies highlight what this election may mean to the oil and gas industry. Regardless of what each American’s opinion may be with respect to the issues facing the U.S. today, most Americans care about the environment as well as energy security and the economy. Whoever wins would be well-advised to take an approach that balances all three of these factors.