The weeks following President Biden’s so-called “Climate Day” executive orders left the oil and gas industry adjusting to a new normal following the Department of the Interior’s (DOI) leasing moratorium and the Acting DOI Secretary’s Secretarial Order (the “Order”) that revoked the authority of most career staff to issue permits on their own accord. In a move that generated significant attention within the industry in late January, DOI reportedly revoked about 70 permits that career staff issued after the President’s inauguration. The administration claimed that DOI issued those permits improperly, presumably because career staff issued them in contravention of the Order. It then canceled a public meeting for an upcoming lease sale off of Alaska’s coast, as well as upcoming on- and off-shore lease sales in the Gulf of Mexico, Colorado, Montana, New Mexico and Wyoming.
This does not mean that DOI paused the issuance of new permits altogether; to the contrary, DOI claims to have been processing over 5,000 drilling permit applications as of February 12, 2021, approximately 250 of which have gone to career leadership for review. It remains to be seen whether DOI slows the actual issuance of new permits between now and when the Order expires in late March. The Department also reportedly issued over 30 new permits in the Gulf of Mexico between January 20 and the end of the month. In any event, the Biden administration may rely on Secretary-to-be Haaland and the other political appointees to replace the Order with a new directive or more stringent guidance to the career officials who typically make those types of permitting decisions.
Regardless of what course of action the administration takes with respect to permitting, one thing is certain: DOI will not issue new leases for the foreseeable future barring an unexpected result in the Western Energy Alliance’s lawsuit seeking to overturn the leasing moratorium. Such a move would be surprising given the relatively wide latitude that DOI enjoys in implementing the federal oil and gas leasing and permitting program.
Other noteworthy updates from the last few weeks include confirmation during a recent White House press conference that pipeline projects will require a review of climate and environmental impacts, (also confirming that the administration is scrutinizing all facets of the oil and gas industry, from exploration to consumption). Accordingly, we do not expect Sen. Joe Manchin’s (D-WV) request for the President to reconsider the Keystone XL pipeline permit revocation to succeed. That said, the administration is expected to support the industry in an upcoming U.S. Supreme Court case that will evaluate the PennEast pipeline company’s authority to exercise eminent domain powers delegated by the Federal Energy Regulatory Commission. The support likely is motivated, at least in part, by the potential to apply similar eminent domain authorities to construct future renewable energy transmission lines.
Another development that impacts the industry is last week’s decision by the Fish and Wildlife Service to delay the date upon which a Trump-era Migratory Bird Treaty Act rule becomes effective. That rule interpreted the Act to prohibit only the intentional killing or injuring of migratory birds (as opposed to accidental, or “incidental,” kills or injuries). The delay will require developers to continue to delay construction and vegetation clearing during migratory bird nesting seasons until the rule becomes effective or, if rescinded, longer.
Meanwhile, the climate conversation continues to heat up on Capitol Hill. While efforts to include environmental or energy provisions in the upcoming COVID-19 relief package stalled, there was a vote to include an amendment in the recent Senate budget resolution that would prohibit the U.S. Environmental Protection Agency and the Council on Environmental Quality from banning fracking. A wider vote eliminated that amendment, but seven Democrats (and all Republicans) voted in its favor, a signal that even the current Democratic-controlled Congress is highly unlikely to enact a nationwide fracking ban. Additionally, Senate Democrats narrowly outvoted another amendment that would have prohibited the federal government from implementing a carbon tax. Although Republican support for a carbon tax is virtually nonexistent, this voting means that there could be appetite among Democrats (even the more moderate ones) to incorporate a carbon tax or other market mechanism into upcoming climate or infrastructure legislation. Moreover, some of the more progressive members of Congress proposed a bill in early February that would require the President to declare a national climate emergency, but we do not expect this proposal to gain the support of moderate Democrats.
Finally, the House Subcommittee on Environment and Climate Change held a hearing last week on “restoring federal climate leadership” that included testimony by union and nonprofit leaders. House Democrats used the hearing to espouse support for an “equitable clean energy future” and to rally around some of the proposals in last year’s draft CLEAN Futures Act, a comprehensive climate package that Democrats proposed in early 2020 to frame climate legislation. Republicans, meanwhile, criticized the Biden administration’s early climate actions as harmful to national security, job growth and vulnerable communities. Some Republicans, like Reps. John Curtis (UT) and Dan Crenshaw (TX), championed natural gas as a key component of the transition to a low-carbon future, suggesting that gas might be an area of compromise if Democrats seek bipartisan support for future climate legislation.
Looking ahead, Michael Regan appears poised to receive a bipartisan Senate confirmation to lead the U.S. Environmental Protection Agency. Once in place, we expect the agency to focus on implementing the Biden administration’s “Build Back Better” plan. On a separate track, the House Subcommittee on Energy holds a hearing this Thursday, February 18, on “pathways to a clean energy future.”