Ten Years to Flatten U.S. Domestic Energy Industry
It is no secret that domestic oil and gas production is public enemy number one for the Biden administration. In his State of the Union Address, President Biden said, “We’re still going to need oil and gas for a while.” While responding to laughter from the Republicans, he said the quiet part out loud again, “We’re going to need domestic oil for at least another decade.”
Wildly unrealistic? Of course. However, they mean it and their actions speak louder than their bungled words. This administration’s approach to choke off domestic energy production includes executive orders, administrative rule-making, public-private partnerships, sue and settle, and a complicit Congress. Make no mistake, this is quite formidable opposition to an industry that supplies the vast majority of our domestic energy.
This year will bring many of these challenges into clear focus. The public comment period for the Bureau of Land Management’s (BLM) proposed rule to beef up methane and flaring rules on oil and gas operations that touch federal lands closed on January 30.
The comment period on the Environmental Protection Agency’s (EPA) proposed methane rule that will drastically increase regulations and the cost of operation ends February 13. And, the Treasury Department’s comment period on rules related to climate risk assessments by big banks closed on February 6.
Finally, the U.S. Army Corps of Engineers’ draft Environmental Impact Statement (EIS) on the Dakota Access Pipeline (DAPL) is scheduled to be released to the public in March. DAPL was allowed to continue to deliver North Dakota oil to the market during the EIS process, but any future negative impact on that pipeline could turn off the lights on Bakken oil production for a significant amount of time.
The initiatives to shackle the oil and gas industry and targeting methane were introduced at the United Nations Climate Change Conference, known as COP27. Funding for this and other green energy boondoggles comes from the oddly named Inflation Reduction Act of 2022, signed into law last August.
Oil and gas operators in the Bakken region of North Dakota dug out from two crippling blizzards late last year and now face the full force of the Biden administration’s efforts to decarbonize our economy. A perfect storm is upon us.
Some are pushing Congress to rein in the runaway federal agencies in Washington, DC, and point to the Congressional Review Act (CRA) as a solution. Industry is wise not to put much hope in the nation’s elected officials as Congress long ago handed over its constitutional authority to the DC bureaucracy. The CRA was a toothless tiger even when Republicans held both houses of Congress during the first two years of President Trump’s term.
In 2017, the House passed a resolution (S.J. Res 11) to repeal an earlier BLM methane rule. However, in May of 2017, the Senate rejected the resolution 49-51 after three GOP senators voted with the Democrats to keep the BLM rule in place.
This is just another example of “permanent Washington” ignoring the needs of everyday Americans. As of now, the oil and gas industry will not receive any help from Washington.
Administrative rules regulating methane and banking are other weapons being used to stifle oil and gas operations. The BLM, acting under the direction from E.O. 13990 issued in January 2021, has failed to conduct the required quarterly federal lease sales. In fact, BLM did have one scaled-back quarterly lease sale in 2022 and has canceled the sale for the first quarter of 2023.
The slow walking of federal leases has a significant impact on oil drilling in North Dakota. While 85 percent of minerals in North Dakota are privately owned, a total of 6,345 future wells are in regulatory limbo. For perspective, a minimum of 24,000 additional wells are needed to fully develop the Bakken oil field, so the future wells impacted by the federal lease issue represent more than 25 percent of the future wells needed. In dollar terms, a University of Wyoming study showed that North Dakota will lose $570 million over the next 15 years from the ban on drilling activity.
There is ongoing litigation on this issue with North Dakota and other oil-producing states fighting to enforce the requirement for quarterly lease sales. In early January, North Dakota filed a motion for Summary Judgment in federal court.
The sue and settle practice used so effectively to push the climate agenda during the Obama administration is back. It’s another tool the Biden administration is using to punish the oil and gas sector. The cozy relationship between environmental groups and Washington is the epitome of corrupt public-private partnerships.
On September 6, 2022, the BLM and a group of environmental groups filed a proposed “settlement” with BLM agreeing not to issue drilling permits on leases auctioned in 2019 and 2020 in North Dakota, South Dakota, and Montana. The settlement was based on the BLM completing a revised National Environmental Policy Act (NEPA) analysis requiring analysis of certain factors such as the social cost of carbon. The significant NEPA reforms from the Trump administration are long gone. This settlement is a win-win for the Biden administration and environmental groups, but a significant loss for oil and gas operators, our economy, and mineral owners who are deprived of their property and royalty income.
The domestic oil and gas industry is already struggling with fluctuating oil prices, transportation issues, a severe shortage of skilled workers, and many other problems.
Anyone who understands the economic and public safety impacts from this rush to decarbonize our economy, not to mention the human flourishing that we have enjoyed over the past 150 years built on cheap, affordable, energy, should speak up to legislators and state officeholders. After all, they represent you.
We face these issues today because far too many people accepted the false premise that manmade CO2 emissions are destroying the planet. Businesses today are distracted from their core competency, what they do best, to chase the green agenda rabbit. It is a waste, a zero-sum game, and we are all paying the price, literally.
We cannot appease those who want to fundamentally change our economy and our country. Playing by their rules while the deck is stacked against us is not going to end well. We have to stop playing this losing game at the state level. It is time for a reality check and it is past time for a new set of rules to protect individuals and small businesses. Most needed today is a return to the robust federalism, “the laboratories of democracy,” that made America great in the first place.
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