Executive orders would give Biden options to limit oil and gas production

(Bloomberg) --Fracking has emerged as a hot button issue of the 2020 election, with President Donald Trump claiming his political rival will cripple the economy in politically important states such as Pennsylvania by putting an end to the well extraction technique, despite Joe Biden’s assertions to the contrary.

There’s good reason it’s getting so much attention: Hydraulic fracturing is used to coax oil and gas out of roughly 95% of U.S. wells, according to government data.

While Biden has called for prohibiting new oil and gas projects on federal land, the candidate has made it clear he does not support a widespread ban on fracking -- which involves pumping water, sand and chemicals underground to free oil and gas from dense rock formations.

Even if Biden wanted to, he couldn’t unilaterally ban fracking on private lands. Under a 2005 law, the Environmental Protection Agency has almost no regulatory power over fracking. Changing that would require an act of Congress.

There are several ways Biden could halt fracking on federal lands using executive power. He could ban new oil and gas leases, halt new permits, or seek a specific regulatory ban on fracking, all of which Biden has telegraphed at one point or another on the campaign trail.

“It would be foolish to assume Biden would not carry out his promise,” said Kevin Book, managing director of research firm ClearView Energy Partners. “He has all the power in the world.”

That doesn’t mean it will be easy. A regulation banning fracking on federal land would have to go through a process that would likely be challenged in court as a violation of federal law that encourages oil and gas development. Even an Obama-era Interior Department rule that merely set standards for fracking on federal lands -- while still allowing the activity -- was tossed out.

Instead, it’s more likely Biden would go through the “side door” that could include a combination of rewriting drilling and land management plans and the use of emergency authority to achieve a cessation on leasing and permitting, Book said.

“With the stroke of a pen without any delay Bureau of Land Management staff could be allocated away from leasing and permitting activities,” said Book. “It takes people to write permits, it takes people to write production and drilling plans.”

What about a freeze on new leases?

A Biden administration could take a page from Obama’s playbook and freeze new leasing to allow time for a thorough evaluation of the environmental impacts of oil and gas development on federal land. The Obama administration used the same tactic to halt the sale of new coal mining rights.

The Interior Department also could impose costly new requirements on oil companies operating on federal land -- including stringent mandates to capture methane from wells, compressor stations and other infrastructure. Legal challenges to new mandates or delayed permits could take years to resolve, with activity sure to be slowed in the meantime.

Still, a broad ban on new drilling permits or even lease sales would be difficult for Biden to impose immediately. Both federal law and the Bureau of Land Management’s resource management plans governing territory under the agency’s control mandate regular lease sales. And oil companies could challenge regulators’ inaction or permit denials for the leases they hold under contract law. The Interior Department has resorted to buying back some leases to settle previous disputes.

“Once areas are available for leasing, it becomes very difficult for the BLM not to lease,” said Elizabeth Klein, a former associate deputy secretary at the Interior Department under former President Barack Obama. “And once you sign a lease, you are committing to that leaseholder that they will be able to develop and that they’ll be able to do something with the lease.”

What would the actual impact of that be?

The impact of Biden’s plan would be limited since most fracking occurs on private land, not public. Onshore oil production on federally owned land was approximately 6.5% of the U.S. total in 2019, and onshore federal gas production made up 10% of the U.S. total, according to consulting firm ClearView Energy Partners.

The impact would hit at least one blue state hard. In New Mexico, roughly 90% of all production in the in the state’s portion of the oil rich Permian shale basin was on state and federal lands last year, according to the New Mexico Oil & Gas Association. In 2017 more than half of New Mexico’s oil production and nearly 67% of its natural gas production occurred on federal lands, according to the same group.

In the swing state of Pennsylvania the amount of gas produced from federal land accounts for less than a one hundredth of 1%, according to ClearView.

A ban on offshore drilling in federal waters, which Biden has also proposed, would be much more impactful nationwide. It accounts for roughly 16% of total production.

What has Biden actually said about fracking?

Biden has called for banning fracking on federal lands, but has said he does not support a nationwide ban on the technique and has argued the practice needs to continue while the U.S. moves toward cleaner sources of energy. He has also noted the importance of natural gas production in the politically important states of Pennsylvania and Ohio.

“Fracking has to continue because we need a transition,” Biden said during a CNN town hall last month. “But there’s no rationale to eliminate, right now, fracking.”

In addition to calling for achieving carbon-free power emissions by 2035 and overall net-zero emissions in the U.S. by 2050, Biden’s climate plans have taken aim at the oil and gas industry, banning new projects on public lands and waters and promising aggressive limits on the sector’s emissions of methane, a powerful greenhouse gas. He’s also called for making sure wells are safely designed and plugging methane leaks.

Confusion surrounding Biden’s stance on fracking is partly due to his own making. During a primary debate in March, Biden said he would eliminate fracking. His campaign the next day said the candidate misspoke and clarified his stance. Senior campaign officials have since said Biden is committed to no new fracking on federal lands.

What’s the political benefit?

A more narrow ban on fracking solely focused on federal land, could provide Biden political cover among progressive environmental groups and others stringently opposed to fossil fuels. At the same time the limited nature of the ban means it is unlikely to hurt him among voters in swing states where fracking takes place on private lands such as Pennsylvania and Ohio.

What do environmental groups think?

Environmental groups are largely supportive of Biden’s pledge, but many argue it doesn’t go far enough to address the urgent crisis of climate change.

“It’s a great first step, but it’s just that,” said Collin Rees, a senior campaigner with Oil Change U.S., an environmental group that advocates shifting away from fossil fuels. “We know we need to do a lot more.”

Other groups, such as Food & Water Watch, have said they need more details about the plan, including how it would treat the process of using fracking to re-stimulate production from old wells.

What does industry have to say about the idea?

Naturally, the oil and gas industry isn’t very keen on the idea. They argue such a policy would threaten jobs and the economy, have a disproportionate effect on states’ like New Mexico and ignores the environmental benefits of the natural gas produced through fracking.

“Energy policy put forth by our nation’s leaders should support U.S. shale -- not threaten it to score political points with activists who are seeking radical, unrealistic change over practical solutions and compromise,” said Anne Bradbury, chief executive officer of the American Exploration and Production Council, a trade group representing independent oil and natural gas producers.

Others, such as Mike McKenna, who previously served in Trump’s White House as deputy assistant to the president, say if a Biden administration were to ban fracking on federal land they will eventually ban all production on federal land.

“Mr. Biden himself has been courteous enough to say that he would like to get rid of all fossil fuels,” said McKenna. “Getting rid of hydraulic fracturing on federal lands is merely a gateway drug.”