There has been no shortage of energy industry news since President Joe Biden took office in January: last week, a group of Republican senators introduced a bill pushing back against the administration’s recent suspension of new drilling permits on federal lands; Biden’s move to revoke the Keystone XL pipeline permit is making waves; and oil companies are working to reposition shale oil as a “cleaner” fossil fuel.
This is the first installment of a new biweekly news roundup from RSM about three things going on in the energy industry that we think you should know about. Here’s the latest.
Pushback on drilling permit suspension
On the heels of the recent announcement that the U.S. Department of the Interior suspended approvals of new oil and gas drilling permits and leases across domestic and federal lands for 60 days, Republican senators from several oil-producing states have introduced a bill to block the suspension. The Protecting our Wealth and Energy Resources Act (POWER) is aimed at preventing the Biden administration from suspending drilling on federal lands without the approval of Congress. The bill was introduced by Sen. Bill Cassidy of Louisiana along with 24 other senators, according to Reuters. Opposition to the pipeline’s suspension was expected, especially from states that rely heavily on the production of oil and gas to support their economy.
Keystone XL pipeline decision ripple effects
Biden’s decision to revoke the Keystone XL permit as one of his first executive orders on Inauguration Day has reverberated through Canada and its energy industry. On Biden’s first phone call with a foreign leader since taking office, Prime Minister Justin Trudeau expressed disappointment at the decision to cancel the project. In a letter to Trudeau, Alberta’s Premier Jason Kenney demanded that there should be “proportionate economic consequences” and that the Biden administration should provide compensation for “billions of dollars of costs incurred in the construction of Keystone XL to date.”
In the wake of the Biden administration revoking the permit for Keystone, TC Energy Corp. told employees it will “eliminate more than 1,000 construction jobs in coming weeks,” Reuters reported. The change is also expected to negatively impact Indigenous employment in both the short and long term, as 7% of Canada’s oil and gas industry workers are Indigenous, compared to 3% in other industries, according to the CBC. Natural Law Energy, a group comprised of five First Nations, had committed to make an equity investment of $1 billion in Keystone XL to provide financial security for future generations.
TC Energy in January announced a commitment of $1.7 billion for Keystone XL to achieve net zero emissions when placed in service in 2023, slating the project to become “the first pipeline to be fully powered by renewable energy,” the company said. That’s significant considering that the United States relies on Canada for more than half of its imported crude oil, according to the U.S. Energy Information Administration. That net-zero goal would have made the pipeline a more sustainable way to transport oil than importing from other countries such as Mexico. It will be worth monitoring to see how this divisive decision affects trade relationships between Canada and the United States moving forward.
Repositioning shale oil
American oil companies are mounting a campaign to position shale oil production as a cleaner alternative to imported fossil fuels, Bloomberg reported last week. While major shale players indicate support for more climate-friendly policies, the industry also has significant concerns around potential prolonged restrictions on federal lands. The industry has been under pressure for the last several years due to repeated downturns, investor pessimism, the pandemic and now a new administration pushing a more climate friendly agenda.
Notably, certain American shale plays, such as the Eagle Ford and Bakken, have some of the lowest emissions per barrel compared to barrels produced elsewhere across the globe, according to the Carnegie Endowment’s Oil-Climate Index. American shale oil is generally a lighter, less carbon-intensive oil than what is produced elsewhere, and can often be transported to domestic markets via pipeline, which does not require the consumption of carbon-intensive heavy transportation fuels used in other forms of shipping such as oil tankers.
One element that is “key to shale’s climate impact,” according to the Bloomberg piece, “is how operators manage natural gas that is produced alongside the crude,” which the industry has faced criticism for.
It remains to be seen how producers will handle the increasing amounts of associated natural gas in certain fields and subsequently position American shale as a piece of the solution toward net-zero emissions.