The Biden administration needs an energy reality check
During the first week of his presidency, Joe Biden signed two significant executive orders to help burnish his environment bona fides. On day one, he revoked the permit for the Keystone XL pipeline and, a week later, he declared a one-year moratorium on new leases for oil and gas drilling and fracking on federal lands and waters.
Building the Keystone pipeline would have supported more than 1,000 high-wage American jobs and generated about $8 billion of much-needed economic activity during this pandemic-induced recession. Instead, the canceled pipeline will generate 48,000 tons of scrap metal that may fetch $51 million.
Ironically, the demise of Keystone XL, after a 12-year battle, will do little or nothing to reduce fossil fuel consumption or greenhouse gas emissions. It doesn’t take gasoline vehicles off the road or add renewable energy sources to the power grid. And because Canada is the world’s fourth-largest oil exporter and petroleum is its No. 1 export, our northern neighbor will simply seek new outlets and markets for its Alberta oil through existing and planned pipelines to its West and East coasts while shipping more crude to the U.S. via rail tanker car.
Similarly, it’s not evident the lease moratorium on federal lands and waters will have any measurable environmental benefits. Last year, despite the pandemic, the U.S. remained the world’s largest oil-producing nation while, for the first time in 71 years, exporting more crude oil and petroleum products than we imported.
If domestic production is constrained because of the drilling ban, we will simply revert to being a net importer, consuming more oil from OPEC and other less-reliable suppliers with all the attendant energy security and balance-of-trade issues that entails. Indeed, a recent study commissioned by the American Petroleum Institute estimates that a leasing and development ban on public lands and waters will increase imports by 2 million barrels per day.
It’s even possible that putting restrictions on domestic oil and gas production will lead to greater use of coal for power generation, thereby increasing carbon emissions. (Perhaps not surprisingly, the moratorium does not apply to coal resources on federal lands.)
Federal lands account for about 22 percent of U.S. oil production and 12 percent of natural gas. But in some states, the percentage is much higher. For example, 52 percent of New Mexico’s oil production and 67 percent of its natural gas occurs on federal lands. Most oil and gas production in Colorado, Utah and Wyoming also takes place on federal government property. According to the Bureau of Land Management, in 2019 oil and gas operations in western states generated $76 billion in economic output and supported 300,000 jobs. A study by the University of Wyoming estimates potential tax losses of more than $110 billion in eight western states from a leasing moratorium. New Mexico, the fourth-poorest state in the nation as measured by median household income, could suffer the most in terms of employment and revenues losses.
Though domestic oil consumption may have peaked, that is not the case for natural gas, which is being substituted for coal in power generation and is largely responsible for the huge drop in greenhouse gas emissions in recent years. Over the past decade, U.S. energy companies have invested heavily in the infrastructure to produce, process and transport oil, natural gas and petroleum products. We have become a major exporter of oil and have the potential to become the world’s top supplier of clean liquefied natural gas.
The Biden administration needs an energy reality check. Though renewables such as wind and solar are making inroads, oil and gas will remain America’s — and the world’s — primary energy sources for at least the next 30 years. What’s more, the global economy will recover from the pandemic, as will the demand for oil and natural gas. Canceling pipelines and banning oil and gas production on federal lands simply cedes market share to other countries while doing nothing to combat climate change.
Bernard L. Weinstein recently retired as associate director of the Maguire Energy Institute at Southern Methodist University. He is also an emeritus professor of applied economics at the University of North Texas.