In a world beset with problems, one more now looms: the potential impact of a Biden presidency on the oil and gas industry.
By Bruce Lantz
Since the tumultuous November 3 United States election and President Donald Trump’s disinclination to accept that he’d lost to former Vice-President Joe Biden, a world devastated by the COVID-19 pandemic has faced the question of what the oil and gas industry could expect from a Biden administration, assuming there was one. Now that Trump appears to have accepted defeat, concerns remain about what steps the new U.S. administration will take.
What’s certain so far is that Biden appears to be giving mixed messages to those in the energy sector. For example, he has outlined a $2-trillion climate change plan emphasizing clean energy alternatives to oil and gas, and with it has said he supports a ban on new oil and gas permits, including fracking, on federal lands, and to ban federal subsidies to the oil industry.
He made a campaign pledge to withdraw the presidential permit for TC Energy Corp.’s [TSX-TRP] Keystone XL pipeline and in a debate with Trump on October 22 he said he would “transition” from the oil and gas industry. But at the same time, he has reportedly named Rep. Cedric Richmond to lead the climate change agenda — an interesting choice, given that Richmond has received major funding from oil and gas donors and has voted to help oil and gas companies and against fracking limits.
Keystone XL is of vital importance to Canada, whose GDP will grow by $2.4 billion thanks to it, and especially Alberta, which has invested $1.5 billion into it along with providing a $6 billion guarantee in 2021. The 1,947-kilometre pipeline, already under construction, has created thousands of jobs and will carry 830,000 barrels a day from Hardisty, Alberta to Steele City, Nebraska.
Experts say a Biden ban on fracking is unlikely and that he will green light Keystone XL to avoid undermining considerable U.S. investment in exports while affecting the nation’s global competitiveness and their relationship with Canada. The Ottawa government has said it will press Biden not to cancel permits and will work with their American counterparts on the international stage and on the fight against climate change. With regard to Keystone XL, Canada and TC Energy have made significant innovations relating to cutting emissions which many hope will show Biden how beneficial the pipeline can be.
Meanwhile, the Canadian industry is walking a fine line between fearing the worst and assuming the best.
In a statement to Resource World from The Canadian Association of Petroleum Producers president and CEO Tim McMillan “The United States remains Canada’s largest customer for natural gas and oil exports and the decades of cooperation on energy trade has delivered immense benefits to both of our countries. We will work with governments in Canada and the United States to ensure the progress made on important infrastructure projects continues. Canada and the United States develop some of the most responsibly-produced oil and natural gas in the world and continued cooperation between our countries will benefit us all.”
Their U.S. counterparts are adopting a tougher stance. The American Petroleum Institute will use “every tool at its every tool at its disposal” including a lawsuit against the federal government if Biden tries to restrict oil and gas drilling on federal lands, said chief executive Mike Sommers in a recent interview with Reuters. The U.S. produced nearly 3 million barrels of crude oil and 13.2 billion cubic feet of natural gas per day from federal lands and waters in 2019 — about 25% of the total domestic oil output and more than an eighth of total gas production — which brought about $12 billion in public revenue.
He said the API will work with the Biden administration on energy issues but would “draw the line” over attempted restrictions on lands that were “always meant for multi-use” and which would undermine American energy security. They want to be involved in discussion of issues such as methane emission regulation and Sommers said the API would support Biden’s efforts to rejoin the Paris Climate Accord. Biden, who has said the transition away from fossil fuels can be an economic opportunity if the U.S. quickly moves to become a clean energy technology leader, has also vowed to eliminate federal subsidies to the oil industry and bring U.S. emissions down to net zero by 2050 and the energy industry down to the same target by 2035. That’s ironic given that Biden, when he was former President Barack Obama’s vice-president, helped preside over the rapid expansion of U.S. oil and gas until they became the world’s top producer.
While he hasn’t outlined how he will approach it, it’s likely that Biden will be looking to reverse Trump’s unilateral sanctions on OPEC members Iran and Venezuela, which have taken about 3 million barrels per day of crude oil off international markets, more than 3% of the world supply. But it’s likely he will rely more on quiet diplomatic channels for influencing OPEC than his predecessor. His goal will be the same as any U.S. president: a moderate oil price that leads to affordable fuel for consumers. He will want, however, for prices to be high enough to make clean energy alternatives to fossil fuels competitive.
Despite the uncertainties, there is hope and optimism in the oil and gas sector that compromises can be found, as so often happens when political ideals run up against industry goals.