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5 First Day Energy Actions Expected from President Biden

Barring a reversal by recount or litigation, Joe Biden will be the next President of the United States.

This article discusses what will happen on Day One for the energy industry.  Our analysis is drawn from Biden’s own words, campaign pledges, and written policies—including his Clean Energy Revolution Fact Sheet and Plan for Climate Change and Environmental Justice.

1.       Executive Action – Methane Emission Standards

Sources: Clean Energy Revolution Fact Sheet; Climate Plan

Action: “Requiring aggressive methane pollution limits for new and existing oil and gas operations.”

What does it mean? Roll back the rollbacks. President Trump undertook took numerous measures to roll back Obama-era methane emissions policies at the EPA and BLM. We would not expect a revolutionary change in methane emissions policy from Biden on Day 1, but instead see him turn back the clock to 2016. Biden’s EPA policies, which will affect both public and private lands, will take longer to implement and will face stiffer opposition in the courts. 

2.       Executive Action – Federal Lands Bans

Sources: Clean Energy Revolution Fact Sheet; Climate Plan

Action: “[P]ermanently protecting the Arctic National Wildlife Refuge and other areas impacted by President Trump’s attack on federal lands and waters, establishing national parks and monuments that reflect America’s natural heritage, banning new oil and gas permitting on public lands and waters, modifying royalties to account for climate costs.”

What does it mean? This is another “turn back the clock” effort that looks a lot like the tail-end of the Obama Administration. I gave a presentation about federal lands policies after Trump was inaugurated and he sought to undo Obama’s executive actions, and can confidently say Biden’s plan would involve a tremendous amount of land—far beyond just ANWR.

Obama, for instance, designated 550+ million acres of protected national monuments under the 1906 Antiquities Act, more than double all prior administrations combined. Some of these encroach on major energy plays, like Grand Staircase and Bears Ears National Monuments, adjacent to the San Juan Basin. We must assume that Biden’s plan begins with the restoration of the Obama monument boundaries. The language in Biden’s Clean Energy Revolution Fact Sheet indicates going beyond that.

The idea of banning new leases was a given, and we knew this was coming with pretty much any Democrat candidate.

The increase in royalty rates, however, is generally a construct of this election cycle. Obama pledged to take a “hard look” at increasing federal royalty rates to account for climate change, but his programs never got off the ground by the time of the 2016 election, and were at any rate swiftly undone by Trump. The last Obama-era GAO study on increasing royalty rates investigated hypothetical rates upwards of 29%. Since new leases are supposedly off the table, Biden would be hiking royalties on existing leases, so expect a stiff industry opposition and almost-certain litigation.

3.       Executive Action – Fracking on Federal Lands

Sources: Biden’s Words (Final Debate)

Action: “No fracking and/or oil on federal land” (walked back in the following days to “no new fracking on federal land).

What does it mean? Let’s make the assumptions that (1) Biden sincerely intends not to prevent fracking on private land, through the EPA or otherwise, and (2) the addition of “oil” to his first comment was just a flub.

With those assumptions, this distinction about no “new” fracking on federal lands doesn’t amount to a walkback at all. It is not a change in position. A frac job occurs when it occurs—if the ban is on “new” fracking, then that is logically a ban on all fracking.

All I can say about fracking is “watch this space.”

4.       Executive Action – Biofuels

Sources: Clean Energy Revolution Fact Sheet; Climate Plan

Action: “Doubling down on the liquid fuels of the future, which make agriculture a key part of the solution to climate change. Advanced biofuels are now closer than ever[.]”

What does it mean? There’s not a lot of meat on the bone in Biden’s policies here—specifically, what place do low-ethanol gasoline blends and biodiesel have in his plan? The answer may lie in Biden’s August 2020 support for the Renewable Fuel Standard (RFS). Low-ethanol and biodiesel blends have a place under the RFS with escalating levels of blended biomass over time. 

The Trump Administration has simultaneously supported the RFS and potentially led it to the chopping block under an OMB review of all Clean Air Act programs, (including the RFS). A Biden executive order could simply undo the OMB review process and, additionally, call for a stricter adherence to the RFS.

5.       Executive Action – Rejoin the Paris Agreement

Sources: Clean Energy Revolution Fact Sheet; Climate Plan

Action: “On Day 1, Biden will rejoin the Paris Climate Agreement.”

What does it mean? As a preface, there has long been a question as to whether the Paris Agreement is a treaty or an executive agreement. This hasn’t come up in this election cycle, but you might recall this argument from 2016. Bottom-line, if it is a treaty, then it requires the advice and consent of the Senate; if it is an executive agreement, the executive can bind the country. President Obama entered the Paris Agreement via executive action. President Trump removed the US from the Paris Agreement and the pendent Green Climate Fund obligations by the same method—notwithstanding this precedent, we would still expect legal challenges upon re-entry on the basis that the Agreement is a treaty.

The Paris Agreement is too broad to discuss here in a paragraph, but suffice it to say it is largely an agreement of ambitions. At its heart, the Paris Agreement calls for “nationally determined contributions” that “embody the efforts by each country to reduce national emissions and adapt to climate change.” If a country were to comply with all its NDCs—which means establishing concordant domestic policies—then the agreement becomes very real. We will see in time how this plays out in the Biden Administration.

6.       Honorable Mention – Mandatory Climate Risk Disclosures

Sources: Clean Energy Revolution Fact Sheet

Action: “[R]equire public companies to disclose climate-related financial risks and the greenhouse gas emissions in their operations and supply chains.”

What does it mean? This proposed executive action would affect all public companies, not just public energy companies.

Biden will likely task SEC rulemakers with creating a mandatory reporting framework for climate-related risk. This is currently voluntary; not all public companies report climate risks and even fewer report greenhouse gas emissions. Note the inclusion of “and supply chains”—which may burden the supplied company with policing its suppliers and, at the very least, an increased information gathering obligation vis-à-vis suppliers.

7.       Honorable Mention – Lame Duck Initiatives

Not a Biden Administration action, per se.

Lame duck presidents succeeded by the opposing party routinely sign executive orders and memoranda after the election, if only to give their opponents something to reverse (and thereby give fodder to surviving legislators of their own party). George W. Bush did it. Barack Obama did it to a greater extent. President Trump will likely do it on a level unseen historically. That is not necessarily a knock, just prediction based on history.

Disclaimer: KRCL is party-neutral, and these comments should not be taken as an endorsement of any party or candidate.

Demetri Economou is a Director in Kane Russell Coleman Logan PC’s Energy & Transportation Practice Group, counseling clients on energy, commercial, employment, and bankruptcy matters.