Will Biden Do More To Change Houston Than Oil Prices?
“The oil and gas industry in Houston is struggling to adjust to lower prices and reduced activity. The Biden administrations’ actions, though symbolic, will bring more challenges than the fall in commodity prices. ”
Hours into his new administration, President Joseph R. Biden Jr. signed symbolic statements backing up his and his advisors’ view that responses to climate change should be the governing principle for the next four years: kill the Keystone XL pipeline and rejoin the Paris Accord on climate change! Subsequent actions have suspended the issuance of leases and drilling permits on all federal lands and waters, including in Alaska. All of this is being done in the name of saving the planet. But what about the people? Especially those in flyover country?
With the stroke of a pen, 11,000 jobs were wiped out! Moreover, Montana, South Dakota and Nebraska lost out on at least $65 million in annual property taxes during the pipeline’s life. That ignores the tens of millions of dollars in real estate and sales taxes they would have earned during the construction phase. The pipeline’s demise means that more trains and trucks will be hauling the Canadian oil to U.S. refineries and pipelines, while generating more emissions and putting more people at risk from accidents.
Rejoining the Paris Accord gives social license to institute more misguided mandates and subsidies, when market forces already had the U.S. leading the world in reducing carbon emissions. The switch from coal to natural gas in our electricity system has driven that outcome – and all because the output from the fracking boom drove gas prices below coal prices, causing utilities to switch fuels and reduce emissions. Forget the economic benefits and political power that we earned by becoming major oil and gas exporters. Let alone the income that accrued to the federal government through royalties and taxes.
The 60-day suspension of federal oil and gas leasing and drilling permit approvals is to provide the new administration time to assess their next steps. Do we really think they need to study anything? These are the Obama clean energy zealots who brought us Solyndra at the cost of $500 million of taxpayer money, among others. No. They need the time to assess their political strength and strategy to challenge and change the federal laws that protect the rights imbedded in existing permits and leases. What we saw in 2010 was the Obama administration institute a drilling moratorium in the Gulf of Mexico during the Macondo oil spill – an illegal act. Even after the courts tossed the moratorium, the government reinstituted it and essentially dared the courts to act. The well was plugged before that battle was waged.
As one headline put it, The Dismantling of the Energy Industry Has Begun. Does Joe Biden realize that without the oil and gas industry’s fracking boom, he and Barack Obama would have struggled even more to pull the U.S. economy from the 2008-2009 ditch created by the financial crisis and recession? Stiffing bond holders in GM’s bankruptcy and handing the company over to the unions did little to help the economy recover. Without the job creation and capital spending of the oil and gas industry during that time, we would have limped along in the weakest economic recovery in modern times.
Houston has weathered numerous oil and gas downturns – both from collapsing commodity prices and mishmashes of regulatory policies. The city has always recovered and gone on to bigger and better things. This time may be different. It will be different not because the industry is about to be wiped out, but rather that it will have to confront even more headwinds than right now. Washington’s actions will further tarnish the image of the industry, potentially so much that the new blood necessary to drive it forward will avoid it when seeking careers. For all the hype about clean energy that the administration will be spewing, oil and gas will remain the backbone of our economy for several more decades. Moreover, the technical and logistical expertise that resides in this industry may be what will be needed for carbon emissions breakthroughs that revolutionize the global energy industry. Instead of Houston we have a problem, we look forward to hearing Houston We Have A Solution!