Climate bill’s unlikely beneficiary: US oil and gas industry

Climate bill’s unlikely beneficiary: US oil and gas industry

BILLINGS, Mont. — The U.S. oil industry hit a legal roadblock in January when a judge struck down a $192 million oil and natural gas lease sale in the Gulf of Mexico over future global warming emissions from burning the fuels. It came at a pivotal time for Chevron, Exxon and other industry players: the Biden administration had curtailed opportunities for new offshore drilling, while raising climate change concerns.

The industry’s setback was short-lived, however. The climate measure President Joe Biden signed Tuesday bypasses the administration’s concerns about emissions and guarantees new drilling opportunities in the Gulf of Mexico and Alaska. Industry lobbyists helped shape the legislation to get support from Democratic Senator Joe Manchin (a major recipient of oil-and gas donations).

While the Inflation Reduction Act concentrates on clean energy incentives that could drastically reduce overall U.S. emissions, it also buoys oil and gas interests by mandating leasing of vast areas of public lands and off the nation’s coasts. It also locks together renewables as well as fossil fuels: The Inflation Reduction Act mandates leasing of vast areas of public land and off the nation’s coasts if the Biden administration wishes to have solar and wind.

As a result, U.S. oil and gas production and emissions from burning fuels could keep growing, according to some industry analysts and climate experts. Domestic demand is falling, which means that fossil fuels are being exported more to foreign markets. This includes the Gulf, where oil and gas pollution has a devastating effect on many communities, especially those of low income and minorities. To the industry, this new law shows Democrats are open to working with them, and that they don’t believe fossil fuels will soon become obsolete. Andrew Gillick, Enverus, a company that analyzes energy data, stated that industry agencies and the government use their data.

“The folks that think oil and gas will be gone in 10 years may not be thinking through what this means,” Gillick said. “Both supply and demand will increase over the next decade.”

The result would be more planet-warming carbon dioxide — up to 110 million tons (100 metric tons) annually — from U.S.-produced oil and gas by 2030, with most coming from fuel burned after export, according to some economists and analysts. Other analysts predict lower increases.

The law reinstates within 30 days the 2,700-square miles (6,950-square kilometers) of Gulf leases that had been withheld. This law gives Chevron the opportunity to grow and it overrides concerns expressed by U.S. District Judge Rudolph Contreras about the government’s inability to adequately consider global emissions increases.

The measure’s importance was underscored by Chevron executives during a recent earnings call, where they predicted continued growth in the Gulf and tied that directly to being able “to lease and acquire additional acreage.”

The fossil fuel industry’s ambitions are now directly linked to wind and solar development: The bill prohibits leasing of federal lands and waters for renewable energy unless the government has offered at least 2 million acres (810,000 hectares) of public land and 60 million acres (24 million hectares) in federal waters for oil and gas leasing during the prior year. Leases are not required to be sold. They can only be offered for sale.

The measure’s critics say that’s holding renewables hostage unless the fossil fuel industry gets its way. Some accuse Biden and Democrats of abandoning pledges to confront the industry.

“It’s 10 more years of mandatory leases,” said Brett Hartl with the Center for Biological Diversity. “We will do our damnedest but it’s hard to fight them all.”

Communities near polluting industrial plants will continue to suffer if the oil and gas industry remains vibrant, said Beverly Wright, executive director of the Deep South Center for Environmental Justice and a member of the White House Environmental Justice Advisory Council. She worries that incentives in the law for technology that captures carbon from industrial processes could also perpetuate harm to these poor, mostly minority residents.

In Louisiana’s St. James Parish, where petrochemical plants dominate the landscape, environmental justice activist Sharon Lavigne said the legislation will allow pollution from fossil fuels to keep harming her community.

” That’s like saying that they will continue to poison us and continue to cause cancer,” stated Lavigne. She is a former teacher at high school who started the Rising St. group. James.

The leasing provisions are a failure of environmentalists’ and social justice activists’ efforts to ban leasing nationwide. The movement’s high point came when Biden followed campaign pledges to end new drilling on federal lands with an order his first week in office suspending lease sales.

Republicans complained the administration still wasn’t holding enough sales even after a federal judge blocked Biden’s order. A federal appeals court reaffirmed the injunction blocking the suspension of leasing. However, the law’s new mandates could have minimal impact.

Companies need to have a steady stream of drilling locations to ensure future production. Wells take many years to build and can yield little or no results. Jim Noe is an industry lobbyist, who was involved in the development of climate legislation’s leasing provisions.

” The industry is constantly in need — almost as a treadmill–of lease sales,” stated Noe, an attorney from Holland & Knight that represented offshore oil companies. Noe said demand for oil and gas won’t decline immediately and Gulf drilling brings jobs and more energy security.

A United Nations report before Biden took office warned that the U.S. and other nations need to sharply decrease investments in oil, gas and coal to keep temperatures from rising more than 1. 5 degrees Celsius (2. 7 degrees Fahrenheit) since pre-industrial times.

Other bill provisions that focus on renewable energy and capturing carbon dioxide from industrial plants would result in net emission reductions 10 to 50 times greater than emission increases from burning more oil and gas, analysts say.

The increase in oil and gas emissions still could be substantial — as much as 77 million to 110 million tons (70 to 100 million metric tons) of additional carbon dioxide annually by 2030 from new leasing, according to economist Brian Prest with the research group Resources for the Future.

Other experts had lower projections: The San Francisco-based climate research group Energy Innovation predicted up to 55 million tons (50 million metric tons) of additional carbon dioxide annually from new leasing. Researchers from Princeton and Dartmouth said the impact could be negligible or as much as 22 million tons (20 million metric tons) in the U.S., plus much more abroad. Any increase in oil prices and natural gas prices depends on many factors, including the current war in Ukraine. Robbie Orvis from Energy Innovation said that this is because global oil and natural gases prices will remain high.

“It may increase oil and gas production somewhat, but that is very much offset by all of the other pieces of the bill,” Orvis said.

But it’s not clear how fast other parts of the bill will bring about emission reductions. Wind and solar construction could run into the supply chain problems hindering many economic sectors. The technology for capturing and storing carbon dioxide is being developed and used in a limited way. Other provisions may make drilling on public land and water more costly. There are modest increases in royalty and rental rates and a new $5-per-acre fee when companies want particular parcels offered for lease. Companies would also have to pay methane (or natural gas) that is released into the atmosphere and causes greenhouse gases.

Higher costs may discourage companies from investing in natural gas, according to Mark Squillace at the University of Colorado Law School.

“Even though the industry is going to be getting more oil and gas leasing if they want it, it’s an interesting question: Do they want it?” Squillace asked.


Phillis reported from St. Louis.


On Twitter follow Brown: @MatthewBrownAP and Phillis: @mjphillis


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