The threat of reduced access to federal lands and new rules on infrastructure could prompt the sector to offer alternative green initiatives, writes Chris Knight
The US oil sector is trying to soften president-elect Joe Biden's energy agenda by finding areas of common ground, while drawing a hard line against the incoming administration's plans to halt drilling on federal land and block development of the Keystone XL crude pipeline.
The industry hopes to have a seat at the table as the Biden administration starts to reverse four years of deregulation, tax cuts and increased access to federal lands, with key figures touting the idea of aligning on policies to curb methane leaks, reduce gas flaring and grow exports of natural gas. "We want to work with the Biden administration," says leading industry group the American Petroleum Institute's president, Mike Sommers.
But the sector is prepared for a fight to retain many of the gains it made under President Donald Trump, including steps that the outgoing administration took to weaken environmental laws and lift obstacles to drilling and pipelines. The new regulations are more "reasonable" than the policies they replaced, the industry says, and argues that tough rules would jeopardise the post-Covid-19 economic recovery. "Energy affordability is more important than ever as we recover from the pandemic," Sommers said at an annual event outlining industry priorities.
Oil firms' most pressing concern is Biden's plan to reduce access to federal land and offshore waters that account for 20pc of domestic output, with a ban on new drilling permits and leases. The industry will do "everything at our disposal" to retain that access, Sommers says. Other priorities include keeping a Trump rule that expedited infrastructure permitting and fighting Biden's plans to block completion of the 830,000 b/d Keystone XL.
Oil and gas producers will enter the Biden era holding more than 5,600 unused permits to drill on federal land, offering a potential buffer against disruptions caused by the new president's policies. Those permits, named APDs, have a two-year lifespan that industry officials believe could sustain oil and gas activity. US independent EOG Resources holds more than 1,000 unused APDs to drill on federal land, primarily in New Mexico and Wyoming, but executives say they could shift investment to other areas if needed. And domestic firms Devon Energy and Occidental hold about 530 and 330 unused APDs, respectively.
The Trump administration accelerated the pace of issuing drilling permits last summer as more companies applied, going from an average of 272 per month in 2019 to 474 per month in the second half of 2020 (see chart). Biden's transition team has not offered specifics on the scope of its permitting ban and how it would work, but legal experts say it would be difficult for the federal government to revoke APDs that have already been issued.
Building back
Democratic leaders and business groups this month began rallying around the idea of negotiating a long-sought US infrastructure deal. The incoming Senate leader, Democrat Chuck Schumer, plans to take up a climate bill covering "clean infrastructure" after Congress agrees on new economic stimulus measures. Business group the US Chamber of Commerce's chief executive, Tom Donohue, echoes the idea of an "environmentally responsible" infrastructure package.
But oil groups say they plan to work alongside ethanol groups to try to strip out any funds to support electric vehicles and charging stations, which they claim would distort competition. The industry at the same time wants to preserve its own federal tax breaks, which are worth about $2bn/yr and benefit upstream producers. Biden campaigned on eliminating federal tax subsidies for fossil fuels while increasing the corporate tax rate to 28pc from 21pc.
