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Last week, the Biden administration imposed a 60-day suspension on new permits to lease and drill for oil and gas on federal lands unless Home Department officials approve them.
However, this is a far cry from the most dramatic measure climate activists are calling for (and feared by the oil industry): a total federal ban on hydraulic fracturing.
Rather, Biden’s moratorium on oil and gas leases only applies to federal land, which accounts for less than a quarter of total oil production in the United States and much less for natural gas. And the freeze has no impact on existing leases.
In other words, ExxonMobil and Chevron can continue to fracture.
“We don’t think Biden has the power to ban hydraulic fracturing and if he did, he wouldn’t go that far,” said Bob McNally, founder and chairman of consulting firm Rapidan Energy. “Biden remains a centrist with close ties to the unions, which would oppose such a move.”
Indeed, a total ban on fracking would eliminate tens of thousands of jobs in Pennsylvania, Ohio and Texas – three states at the heart of Washington’s balance of power.
Little threat to oil supplies, at least for now
“He’s no kidding when it comes to imposing tough new restrictions on the US oil industry,” said McNally, a former Department of Energy official under President George W. Bush.
Energy analysts have ruled out the risk that these measures will trigger a sudden surge in oil prices, which have rebounded sharply from their pandemic low. That’s because the world is always swimming in excess oil, and many drilling companies have stocked up on permits and leases in case Trump loses the election.
“In the short term, the market remains very well supplied,” said Ryan Fitzmaurice, energy strategist at Rabobank. “In terms of immediate impacts, this is more symbolic than a real threat to oil supplies.”
Longer term, less domestic production means the United States may have to buy more oil from the Middle East and elsewhere overseas.
“The highlight of US oil production is probably in the rearview mirror,” Fitzmaurice said.
Rapidan Energy predicts that the United States will produce about 1 million barrels per day in 2023 than if Trump had won a second term.
The oil industry is preparing for a fight
The biggest impact of Biden’s lease freeze will be felt in New Mexico, where oil companies have rushed to drill wells on federal lands in the Permian Basin at low cost. The state is on track to become America’s second-largest crude-producing state this year, after Texas, according to Rystad Energy.
The oil industry promises a fierce response to the moratorium on Biden’s hire.
“We will do all we can to fight this decree,” Mike Sommers, CEO of the American Petroleum Institute, told CNN Business Tuesday. “We will continue with all actions available to us to roll back, including legal options, where appropriate.”
Sommers said he was concerned that the Biden administration could harm oil development by slowing the issuance of permits on federal lands. He admitted, however, that fracking on private land is unaffected by Biden’s order and that there is nothing preventing oil companies from putting wells already drilled by fracking into production.
“We are concerned about what this leads next,” Sommers said. “We are sounding the alarm.”
“ They keep their promises ”
As the oil industry worries, climate activists are celebrating – and calling for more.
Wenonah Hauter, executive director of environmental group Food & Water Watch, said in a statement that Biden’s freeze on federal lands is “good news, but only if followed by a strong plan to ban all extraction for good. dirty energy on public lands “.
Tom Steyer, the billionaire who competed for the 2020 Democratic presidential nomination, gave the Biden administration an “A” for his early actions to tackle climate change.
“They keep their promises,” Steyer told CNN Business. “We have a global crisis. There is a global response. America can lead that response or we can follow it.”
Biden faces a challenge in responding to the climate crisis without wiping out jobs and derailing the recovery of the wider economy.
Republicans have warned that Biden’s Keystone XL decisions and the Paris Agreement would cut thousands of jobs in the United States.
“The clock is ticking for more jobs that will be lost in this industry as a result of these actions,” said Sommers, CEO of API.
Steyer, the billionaire climate activist, said Biden would not lose sight of the impact on workers in fossil fuel communities.
“The issue of looking after specific workers in a specific location is absolutely in the heart and soul of Joe Biden,” he said. “It’s the thing that motivates him the most.”
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