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Administration's Federal Leasing Policy Continues to Raise Flags

The Biden administration’s pause in new natural gas and oil leasing on federal lands and waters continues to look like a hard sell, not only in energy-producing states but also with traditional Democratic allies in organized labor.

We’ve talked about potential negative effects of the administration’s policy on leasing and have warned against even greater impacts to the economy and American energy security if the pause becomes a permanent ban on federal leasing and development (see here, here and here). Projected impacts from a full-on ban on leasing and development in an analysis by OnLocation include approximately 1 million jobs could be lost – nearly 120,000 in Texas, more than 62,000 in New Mexico and more than 48,000 in Louisiana – foreign oil imports could increase 2 million barrels per day; and carbon dioxide emissions could increase 5.5%

Similar concerns surfaced as the U.S. Interior Department (DOI) held a forum on the federal oil and gas program. At the public session, Frank Macchiarola, API senior vice president of Policy, Economics and Regulatory Affairs, noted that federal lands and waters account for 22% of U.S. oil and 12% of U.S. natural gas production and urged DOI leaders to recognize the importance of this production to U.S. energy security, economic growth and continued environmental progress.

New Study: Cross-Border Energy Infrastructure Critical to U.S.-Canada Energy Trade, Benefits Consumers on Both Sides of the Border

WASHINGTON, April 6, 2021 – The American Petroleum Institute (API) today released a new report examining how growth in cross-border petroleum trade between the United States and Canada has led to the further integration of North American energy markets, delivering economic benefits, lowering consumer energy costs and strengthening energy security on both sides of the border. The analysis, which API Senior Vice President of Policy, Economics and Regulatory Affairs Frank Macchiarola highlighted in remarks before the 2021 Scotiabank CAPP Energy Symposium earlier today, underscores how continued development and maintenance of cross-border energy infrastructure will be critical to sustaining this trade relationship and further integrating North American energy markets.

'A Turning Point in the National Climate Debate'

API’s new Climate Framework touched off predictable reaction from certain circles – ranging from groups that oppose industry’s very existence to others focused on a single aspect of the framework, carbon pricing.

Frankly, API’s action plan speaks to the vast majority of Americans who support commonsense approaches for lowering greenhouse gas emissions and further improving environmental protections – while also providing the energy from natural gas and oil that our country needs to grow and prosper.

Through the Climate Framework our industry is offering substantive leadership on the climate/energy challenge, with the overarching goal of meaningful progress.

WTAS: Praise For API’s New Climate Framework

The American Petroleum Institute (API) released its new Climate Action Framework earlier this afternoon, and it’s already being called by some as “the most important climate policy development since the election of President Biden” that “could be a turning point in the national climate debate.” Please see below for some of the positive statements API has received touting the importance and benefits of our new framework to a low-carbon future:

Why Energy Infrastructure Is an Opportunity for Bipartisanship

The natural gas and oil industry shares the ambition of President Biden and Congress to accelerate economic recovery for all Americans. As policymakers consider the nation’s energy security and opportunities for future job creation, it is important not to overlook our critical energy infrastructure.

That reality came into stark focus last week, when winter storms and surging energy demand caused power outages across Texas and other parts of the U.S. Millions of residents were without electricity, water and heat amid frigid temperatures. The treacherous conditions served as a reminder that an all-of-the-above approach to energy along with durable infrastructure are essential to powering life in America without interruption.

When it comes to heating homes, fueling cars or simply keeping the lights on, America’s extensive pipeline network ensures widespread access to affordable, reliable fuels. But we cannot stop there.

Explaining Texas: Frigid Conditions Tax All Parts of Energy System

More than 4 million Texas homes and businesses have been without electricity this week as an Arctic air mass left the state coping with temperatures hovering around zero. Electricity and natural gas use spiked and rolling blackouts were ordered as energy systems experienced what the Webber Energy Group’s Joshua Rhodes called a “black swan event” that taxed all parts of those systems at the same time.

I spoke with Dustin Meyer, API vice president of Natural Gas Markets, to find out what happened in Texas, to understand the conditions that left the nation’s No. 1 energy state struggling for power and heat and what resources could help prevent this from happening again.

Bottom line points: Texas’ difficulties represent a failure of the grid across the board, with all generation technologies falling short of expectations; as in California last summer, events in Texas underscore the need for a diverse energy supply and smart planning to support the health of the U.S. power grid; natural gas, unique among energy sources in supplying needed attributes that ensure grid reliability, is and will remain a key in that diverse mix; and natural gas has carried most of the energy load in Texas this week, and without its contributions the energy picture would have been even worse. Expanded infrastructure would help make natural gas systems more resilient.

Lessons from Oklahoma's Government Intervention in Natural Gas Markets

This past year saw Oklahoma officials pursue a unique experiment – reducing how much natural gas production would be permitted from a well, called “natural gas production prorationing.” 

This may be about to change. The intervention has been costly for the state and suggests that governments should exercise more caution when considering actions that could affect markets.

Regulations to prevent wasting resources have been on the books for decades, and Texas has something similar. However, through its Corporation Commission, Oklahoma was the only state that imposed more stringent natural gas production limits last year. The state also increased its efforts to enforce those rules in response to market conditions associated with the COVID-19 recession – that is, strong supply, weak demand and low prices for natural gas.

It’s looking like a mistake.

Administration’s Leasing Approach is a ‘Step Backwards’ on U.S. Energy

As the Biden administration takes the first step toward a complete ban on federal natural gas and oil development – including the offshore that accounted for more than one-fifth of U.S. oil production in 2019 – turning America’s energy strength into weakness by launching a new era of increased dependence on foreign oil, let’s see how out of step the approach is with the American people.

From polling of voters last summer in key battleground and other states:  93% said it’s important the U.S. produce enough energy to avoid being reliant on foreign oil; 90% said it’s important to create access to domestic energy; 69% said safe domestic natural gas and oil production makes the U.S. less reliant on foreign energy and has increased U.S. security. (Just 16% disagreed.)

All three viewpoints sharply contrast with where the Biden administration appears to be going with its announced halt on natural gas and oil leasing on federal lands and waters – which many believe will become a full ban on federal development.

Put simply, the White House is advancing an import-more-oil policy – one that would discard the hard-earned security, economic and environmental gains from a decade and a half of domestic energy resurgence. 

Energy Builds America

U.S. natural gas and oil drives employment, opportunity and economic growth – even as it supports critically important conservation and preservation – in all 50 states and the District of Columbia, detailed in the map above. Hover over each state to see jobs associated with natural gas and oil in that state – direct jobs in industry and its supply network, as well as jobs in other sectors that are supported by the spending of industry and its employees. All are vital to national and state economies. The conservation figures are cumulative funding from the federal Land and Water Conservation Fund (LWCF) since its inception in 1965 – more than $4.4 billion in all. Revenue from offshore natural gas and oil development supplies virtually all of LWCF’s funding.

Oil Market Fundamentals Suggest 2021 May Recoup Much of 2020 Losses

Although many uncertainties remain, oil market fundamentals have recently improved along with economic recovery from the 2020 COVID-19 recession, as we discussed here. If estimates from the U.S. Energy Information Administration (EIA) and others prove to be correct, 2021 could recoup much of the growth, spending, investment and energy demand that was forgone this year. 

While 2020 has been an especially challenging year and business climate, what we’re seeing is that the U.S. natural gas and oil industry has resiliently increased its productivity to record levels, lowered its costs and expanded critical infrastructure to reposition for growth in a potential recovery.

A critical question for the United States — its economic growth, energy security and trade balance – concerns who will supply the market if it recovers as expected.