Unlikely Beneficiary of Climate Bill: US Oil and Gas Industry | Technology



BILLINGS, Mont. (AP) – The U.S. oil industry hit a legal hurdle in January when a judge overturned a $192 million oil and natural gas lease sale in the Gulf of Mexico because of future emissions. of global warming resulting from fuel combustion. It came at a pivotal time for Chevron, Exxon and other industry players: the Biden administration had slashed opportunities for new offshore drilling, while raising concerns about climate change.

The industry setback, however, was short-lived. The climate measure signed Tuesday by President Joe Biden sidesteps the administration’s concerns about emissions and secures new drilling opportunities in the Gulf of Mexico and Alaska. The legislation was designed to win the support of a top recipient of oil and gas donations, Democratic Sen. Joe Manchin, and was shaped in part by industry lobbyists.

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While the Cut Inflation Act focuses on clean energy incentives that could significantly reduce overall U.S. emissions, it also supports oil and gas interests by mandating the leasing of large areas of public lands and off the coast of the country. And it locks renewables and fossil fuels together: If the Biden administration wants solar and wind power on public lands, it must first offer new oil and gas leases.

As a result, U.S. oil and gas production and emissions from fuel combustion could continue to rise, according to some industry analysts and climate experts. With falling domestic demand, this means more fossil fuels are being exported to growing overseas markets, including from the Gulf where pollution from oil and gas activities afflicts many poor and minority communities.

For industry, the new law signals that Democrats are ready to work with them and abandon the notion that fossil fuels could soon become obsolete, said Andrew Gillick of Enverus, an energy analytics firm whose data is used by industry and government agencies.

“People who think oil and gas will be gone in 10 years may not be thinking about what that means,” Gillick said. “Supply and demand will increase over the next decade.”

The result would be more planet-warming carbon dioxide — up to 110 million tons (100 million metric tons) per year — from oil and gas produced in the United States by 2030, most of it coming from the fuel burned after export, according to some economists and analysts.

A Department of Energy analysis obtained by The Associated Press on Thursday said provisions of the rental law “could result in some increase” in carbon pollution, but other provisions would reduce 35 tons of greenhouse gases for each new ton of pollution from fossil fuels.

The law reinstates within 30 days the 2,700 square miles (6,950 square kilometers) of Gulf leases that had been withheld. This ensures that companies like Chevron will have the opportunity to grow and overrides US District Judge Rudolph Contreras’ concerns that the government was “pushing full speed ahead” without giving enough consideration to rising global emissions.

The importance of the measure was underscored by Chevron executives during a recent earnings call, where they predicted continued growth in the Gulf and tied it directly to the ability to “lease and acquire additional areas”.

Fossil fuel industry ambitions are now tied directly to wind and solar development: The bill prohibits the leasing of federal land and water for renewable energy unless the government has offered at least 2 million acres (810,000 hectares) of public land and 60 million acres (24 million hectares) in federal waters for oil and gas leasing in the previous year. The law does not require leases to be sold, only put up for sale.

Critics of the measure say it holds renewables hostage unless the fossil fuel industry gets its way. Some accuse Biden and the Democrats of abandoning their promises to confront the industry.

“It’s 10 more years of mandatory leases,” said Brett Hartl of the Center for Biological Diversity. “We will do our best, but it is difficult to fight them all.”

Communities near polluting industrial plants will continue to suffer if the oil and gas industry remains vibrant, said Beverly Wright, executive director of the Deep South Center for Environmental Justice and member of the White House Environmental Justice Advisory Council. She fears that the incentives in the law for technology that captures carbon from industrial processes will also perpetuate harm to these poor, mostly minority residents.

In Louisiana’s St. James Parish, where petrochemical plants dominate the landscape, environmental justice activist Sharon Lavigne said the legislation will allow fossil fuel pollution to continue to harm her community.

“It’s like saying they’re going to keep poisoning us, they’re going to keep giving us cancer,” said Lavigne, a former high school teacher who founded the band Rising St. James.

The rental provisions mark a setback in efforts by environmentalists and social justice advocates to impose a nationwide rental ban. The culmination of the movement came when Biden followed up on campaign promises to end new drilling on federal lands with an order his first week in office suspending lease sales.

U.S. District Judge Terry Doughty in Lake Charles, Louisiana blocked Biden’s order nationwide last year. A federal appeals court on Wednesday overturned Doughty’s decision, then on Thursday he issued a new injunction declaring that lease sales cannot be stopped in the 13 states that opposed Biden’s policy.

A stream of potential drill sites is crucial for companies to maintain future production because wells can take years to develop and some yield nothing, said Jim Noe, an industry lobbyist who has worked with the Senate staff on the rental provisions of the climate bill.

“The industry is in constant need – almost like a treadmill – for lease sales,” said Noe, a lawyer at Holland & Knight, which represented offshore oil and gas companies. Noe said demand for oil and gas will not decline immediately and drilling in the Gulf brings jobs and greater energy security.

A United Nations report before Biden took office warned that the United States and other countries needed to sharply cut investment in oil, gas and coal to keep temperatures from rising more than 1 .5 degrees Celsius (2.7 degrees Fahrenheit) since pre-industrial times.

Other provisions of the bill focusing on renewable energy and carbon dioxide capture from industrial facilities would result in net emissions reductions 10 to 50 times greater than the increase in emissions from burning carbon, analysts say. more oil and gas.

The increase in oil and gas emissions could still be substantial – up to 77 million to 110 million tonnes (70 to 100 million metric tons) of additional carbon dioxide per year by 2030 from new leases , according to economist Brian Perst of the research group Resources for the Future.

Other experts had lower projections: San Francisco-based climate research group Energy Innovation predicted up to 55 million tons (50 million metric tons) of additional carbon dioxide per year from new rentals. Researchers from Princeton and Dartmouth said the impact could be negligible or as high as 22 million tons (20 million metric tons) in the United States, and much more overseas.

Any increase depends on whether global oil and natural gas prices remain high – and that in turn depends on a range of factors, including the ongoing war in Ukraine, said Robbie Orvis of Energy Innovation.

“It may increase oil and gas production somewhat, but that’s more than offset by all the other elements of the bill,” Orvis said.

Still, there is uncertainty about how quickly other elements of the bill could lead to emission reductions. Wind and solar construction could run into the supply chain issues that plague many economic sectors. And carbon dioxide capture and storage technology is still being perfected and its use is limited.

Other provisions could potentially make drilling on public lands and waters more expensive. There are modest increases in royalties and rental rates and a new $5 per acre royalty when companies want particular parcels offered for rental. Another tax would force companies to pay for natural gas, or methane, that enters the atmosphere as a potent greenhouse gas.

Higher costs could dampen business interest, said Mark Squillace, professor of natural resources law at the University of Colorado School of Law.

“While the industry is going to get more oil and gas concessions if they want it, it’s an interesting question: do they want it?” Squillace asked.

Phillis reported from St. Louis. Seth Borenstein contributed from Kensington, Maryland.

On Twitter, follow Brown: @MatthewBrownAP and Phillis: @mjphillis

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