Untangling the Impacts of the Biden Administration Actions on Oil and Gas

Pub. 2 2020-2021 Issue 2

Untangling the Impacts of the Biden Administration Actions on Oil and Gas

Published March 9, 2021

This story appears in the
Association Magazine Pub 2 2020-2021 Issue 2

By The Utah Petroleum Association

As you have doubtless heard, the Biden administration has been hurriedly progressing their policy agenda, starting on day one with the Department of Interior Order 3395 and swiftly following with an Executive Order from the president himself on tackling the climate crisis at home and abroad. While we share in the mission to set forth a sustainable vision for future generations, we clearly have a different definition of “sustainable.” Let’s unpack what these actions mean for Utah.

DOI Order 3395

60-day suspension of delegated authority for anyone other than nine individuals in D.C. to approve:
- New oil, gas, mining approvals
- Resource management plans
- Right of ways
- National Environmental Policy Act approvals
- RS2477 road decisions

Executive Order “Tackling the Climate Crisis at Home and Abroad”

Open-ended ban on new federal natural gas and oil leasing
Comprehensive review and reconsideration of Federal fossil fuel permitting and leasing practices — consideration of greenhouse gas emissions and climate change
Increasing royalties associated with coal, oil, and gas
Accounting for climate costs
Carbon pollution-free electricity sector no later than 2035
Conserving at least 30% of our lands and waters by 2030

Let’s start with some basics — Utah is ninth in the nation in oil production, 13th in natural gas, seventh for non-fuel mineral production, and 11th in coal. This wealth of resources and local decision-making on our energy mix has allowed our natural resource industries to be the backbone powering our state’s economic development. Utah enjoys stable and low-cost energy, which lured the I.T. sector to establish Silicone Slopes and is driving our position as the fourth fastest-growing state in the U.S.. If the Biden policies stand, we risk losing that backbone and the resulting momentum to continue to successfully grow our state.

These policies impact every single Utahn, but they disproportionately impact rural Utah. Roughly two-thirds of the state of Utah is federal lands, most of that located in rural Utah. Locally produced oil and natural gas are critical drivers of our economy, with 56% of our wells located on federal lands. Coupled with the fact that the oil and gas industry provides some of the highest-paying jobs in the state, currently tied with I.T. for highest monthly wages, and the fact that the industry is a top employer in the basin, with oil and gas wages more than 65% above the country average, our rural communities and families will be hardest hit.

Real innovation and progress come from collaboration and creative problem-solving, not from blunt force actions such as the executive order mandating a federal leasing ban and its attendant suite of actions. Utah is an exemplar of such collaboration with the proliferation of Tier 3 gas from our state’s refineries. While the EPA allowed facilities to meet their T3 fuel requirement on a fleetwide basis, all five of the Salt Lake refineries have voluntarily committed to producing Tier 3 gas here in Salt Lake — four are already doing so today. Tier 3 gas reduces harmful emissions by up to 80% in newer vehicles and up to 12% in older cars.

We also need to consider the supply chain impacts, not just in terms of jobs lost (and keep in mind that due to COVID-19, the oil and gas industry has already lost nearly 1,200 jobs in the basin alone) but in terms of our power and fuel supply. Nearly 89% of Utah’s power is supplied from fossil energy, with the bulk of that fuel coming from federal lands. This has allowed Utah to enjoy some of the lowest power prices in the country. Further, our state’s fuels industry is highly integrated, with much of the fuel you get from the pump being produced and refined in the state. Again, simple supply and demand tell us that if the demand stays the same and the supply goes down, prices will go up.

Let’s also consider the 30% conservation goal. Utah is blessed to have both a wealth of energy and mineral resources as well as natural resources that deserve protection. We are home to five national parks, seven national monuments, 43 state parks, and countless other protected areas. In fact, approximately 40% of the state’s public lands are already under some form of additional protection. The false narrative of energy development and conservation being mutually exclusive is proved wrong here in Utah. Based on our fast-growing in-migration, clearly, we are hitting the right balance of low-cost energy and conservation. We don’t need additional conservation requirements that will further reduce the productive areas of the state and their contribution to fueling our economy.

Considering our level of production in oil, gas, coal, and minerals, our state’s power generation, and where the production occurs, the Executive Orders will essentially sentence Utah to higher utility and fuel prices, fewer jobs, and diminished opportunity for all. We hope this is not the intent of the Executive Orders, but it stands to be the harsh reality.

More broadly speaking, it is simply impractical to pivot something as large and complex as natural resource development, our power grid, our fuel supply, and our economy writ large on a dime. The most likely outcome of such an attempt is a swap from responsibly-developed, domestically-produced resources to those from countries that perhaps neither share our values nor have the robust environmental protections we enjoy in Utah and the United States as a whole. Such an outcome will be bad for our environment, bad for U.S. energy security, and bad for our local economy. Our rural families will bear the brunt of such drastic and one-sided decisions.

Real innovation and progress come from collaboration and creative problem-solving, not from blunt force actions such as the executive order mandating a federal leasing ban and its attendant suite of actions. Utah is an exemplar of such collaboration with the proliferation of Tier 3 gas from our state’s refineries. While the EPA allowed facilities to meet their T3 fuel requirement on a fleetwide basis, all five of the Salt Lake refineries have voluntarily committed to producing Tier 3 gas here in Salt Lake — four are already doing so today. Tier 3 gas reduces harmful emissions by up to 80% in newer vehicles and up to 12% in older cars. Thanks to Tier 3 gas, the Wasatch Front is on the path to attaining the PM 2.5 standard. Utah is committed to improving our air quality, and our oil and gas industry has delivered on its promise. Our natural resource industries should be afforded the opportunity to continue to innovate and help solve our communities’ greatest challenges, all while delivering the energy and the materials that power virtually every aspect of our daily lives.