President Joe Biden made good on a campaign pledge hours after taking office to scrap the Keystone XL oil pipeline. Later that day, his Interior Department mandated that, for the next two months, only top agency officials will approve new drilling permits.
Biden will go even further next week, according to individuals familiar with the plans: halting the selling of oil and gas leases on federal property, where 10 percent of its reserves are purchased by the U.S.
The acts sent the stocks of oil producers tumbling and increased blood pressure around the market.
“They are taking steps in the first few days of the new administration that will harm the economy and cost Americans their jobs,” said Frank Macchiarola, a senior vice president of strategy for the American Petroleum Institute. “We’re worried, and it should concern everyone in the country.”
The order signed late Wednesday by the Interior Department changes procedures for 60 days while the new leadership of the agency is in place. Signing off on oil leases and licenses as well as hiring decisions, mining activities and environmental assessments include top brass.
It was taken by the industry as a bad omen. Officials are concerned that, rather than expert regulators in the sector, technical permitting decisions are put in the hands of political appointees. And the licenses concerned—or merely improvements to them—will be postponed for current drilling operations.
In addition, many viewed it as a prelude to wider acts, including the administration’s decision to enforce a moratorium next week on all oil, gas, and coal leases on federal land covering some 700 million acres (2,8 million hectares).
Kathleen Sgamma, president of the Western Energy Alliance, who has threatened to go to court to challenge any such blockade, said that “the announcement is intended as a temporary ban on leasing and permitting but is also a precursor to a longer-term ban.”
Although the campaign promises of Biden – and his initial attempts to fulfill them – are a threat to some U.S. oil producers, by limiting supply, the intervention may be a boon for crude prices.
The early actions of the administration represent a dramatic change from the direction under former President Donald Trump, who wanted to speed up drilling licenses and open more oil exploration locations.
And in early hiring decisions, the shift in direction is already evident. Under Trump, Scott Angelle, a longtime oil industry ally and former Louisiana official who advocated for accelerated licensing of Gulf of Mexico oil projects after the 2010 Deepwater Horizon tragedy, was the top offshore drilling regulator at Interior.
By comparison, Marissa Knodel, a former protester with Friends of the Planet, is one of Biden’s first hires at the Bureau of Ocean Energy Management that manages offshore oil leases and wind farms. Knodel was one of around 150 individuals whose rowdy protest in March 2016 over a bureau auction of oil drilling rights prompted the organization to transfer subsequent online oil and gas lease sales.
Biden called for the phasing-out of fossil fuels on the campaign trail and vowed to block new oil and gas licenses on federal property. Worried oil producers, in anticipation of further constraints under Biden, stockpiled leases and drilling permits last year.
But the rapid movements this week also caught many by surprise in the industry, triggering frantic phone calls as lobbyists and lawyers tried to prepare their next steps. They strategize their choices, like lawsuits, and look at any political levers they can pull to forestall a wider ban on leasing.
Alaska Republican Senator Dan Sullivan said permitting reforms would endanger his state’s operations during the current winter season when companies like ConocoPhillips rely on ice roads and ice pads to finance fracking and other activities in the Alaska National Petroleum Reserve.
If you placed a moratorium on NPR-A drilling for 60 days, guess what? You’re missing the whole season,’ said Sullivan on the Senate floor on Friday.
Environmentalists are pleased. They argue it is important to restrict the production of fossil fuels on federal land to reduce the emissions of greenhouse gases that drive climate change. According to a U.S. Geological Survey study, oil, gas, and coal extracted from federal lands and waters are responsible for about 24 percent of U.S. carbon dioxide emissions.
“Pausing new decisions on fossil fuels brings us closer to healthier communities, a healthier climate, and healthier wild places,” said Dan Ritzman, director of the Lands, Rivers, and Wildlife campaign of the Sierra Club. “The climate solution can and must be part of public lands.”