At the end of his campaign, Joe Biden promised that he would not ban fracking or oil and natural gas extraction activities. Still, he never bothered to clarify that he would devote all his efforts to making fossil fuel extraction as unviable as possible. This Wednesday, President Biden signed a new executive order banning new allotments on federal lands to construct fracking projects.
The executive order signed by President Biden makes climate change a national security issue, as well as imposing a pause on all new oil and gas extraction projects in federal areas.
From his first day in office, the Interior Department ordered a 60-day pause on awarding new permits to drill on federal lands unless the senior leadership approves them within the department. The Democratic Party’s progressive wing pushes President Biden to step forward and ban new fracking projects altogether.
Although the measure sends a bad signal to the market, most of the drilling projects are located on state or private land. Only 9% of natural gas extraction comes from fields located on federal lands.
Even so, the federal government owns large tracts of land in use by companies to drill oil and gas wells. Such a policy would greatly affect energy-producing states like New Mexico and Wyoming, which together have nearly 53.8 million acres of federal land. In particular, New Mexico will be the state most affected by Biden’s executive order, as more than half of the productive acreage for fracking projects is on federal lands.
Oil production on federal lands totaled 954.3 million barrels during 2019, a 28% growth in 3 years. Drilling on federal land generated $6 billion in revenue to the government last year.
Many Western states have a large division of lands between state, federal, and private areas. Many investors are concerned about potential legal issues regarding pipelines passing through federal territories.
Biden’s policy returns to the Obama era
While Biden has not imposed a formal ban on new fracking projects, this is not the only way to cripple the industry. Burdening it with prohibitively expensive regulations, diluting permit issuance, and increasing costs via taxes are among the many ways the administration could resort to simply make fracking economically unviable in the United States, at the expense of consumers.
Biden’s policy seeks to discourage future development of fossil energy sources at all costs. Economists at the Heritage Foundation estimate that Obama’s emissions reduction goals, which Biden has reinstated, could cost about 400,000 U.S. jobs.
Last week, Biden approved banning the development of the Keystone XL pipeline network, much to the dislike of the Canadian government. The pipeline connects producing wells in Alberta, Canada, to refineries in Texas, Louisiana, the Midwest, and the Gulf of Mexico. Biden’s decision would come at the cost of 10,000 potential jobs created by the Keystone XL network’s operation.
In addition to restrictions on extractive activities, Biden will most likely seek to impose new taxes on CO2 emissions and similar regulations, as confirmed by Janet Yellen, who stated that “I fully support an effective carbon pricing system, and I know the president does as well.”
Faced with the prospect of more intensive regulation and a higher tax burden on fossil fuels, many companies in the oil and gas sector have begun to make intensive investments in renewable energies such as solar and wind to avoid being left behind.